Tear Sheet: Saudi National Bank

We expect the bank to continue expanding in 2024, thanks to Vision 2030 project opportunities and mortgage lending. We also expect earnings to remain supported by a below-market-average cost of risk and stabilizing margins. This would ultimately help the bank maintain its solid capitalization. Banking Industry Country Risk Assessment: Saudi Arabia, Sept. 22, 2023 Banks In Major GCC Economies Remain Resilient To Less Supportive Operating Conditions, Sept. 14, 2023 Saudi National Bank, Aug. 29, 2023 The stable outlook reflects our expectation that SNB will maintain solid capitalization while keeping risks associated with lending growth in check. We also expect that SNB will sustain its underwriting standards over the next 24 months, with minimal government interference. We view a negative rating

...What's new: Vision 2030 projects will support lending growth of about 13% for Saudi National Bank (SNB) in 2023, which is better than our forecast of 10% for Saudi Arabia's banking sector but slower than we previously expected. The bank's mortgage lending portfolio is still expanding, whereas growth has moderated for other banks. That said, we expect further migration of deposits to interest-bearing deposits to reduce margins by least 10 basis points bps in 2023. Nevertheless, lower credit costs, from recoveries of legacy corporate loans, will support earnings growth. Therefore, we expect the return on assets to stabilize at around 2% in 2023. Why it matters: We still expect SNB to continue to display strong asset quality indicators, thanks to its conservative lending underwriting standards, sectoral diversification, and exposure to low risk mortgage loans. Stage 2 and stage 3 loans accounted for 5.5% of loans as of Sept. 30, 2023, compared to 6.7% on Dec. 31, 2020. However, high interest...

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