Research Reports

2024 Saudi Banking: Interest Rates and NIM Trend Analysis

April 09 , 2024

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Executive Summary

Saudi banks have recorded a positive performance in 2023. With rate cuts in the offing, their impact on Saudi banks’ profitability is of interest. This could be analysed through the change in banks’ net interest margin (NIM) across interest rate cycles. Generally, net interest margin for banks is expected to increase when policy rates increase and vice-versa. However, this may not be the case in practice as banks’ passthrough depends on financial sector concentration, liquidity, and the availability of deposits and lending opportunities.

In Saudi Arabia, banks’ overall NIM has broadly moved in line with policy rate change with some differences with respect to time of change. At bank level, NIM has moved in line with rate change but for the last tightening cycle. In this regard, factors driving change in NIM and expectations for 2024 are also analysed.

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