Saudi Arabia's banks are set to report higher third-quarter profit after they extended loans to real estate and petrochemical projects, and helped arrange record Islamic bond sales. Net income at the 10 biggest banks in the world's top oil supplier probably advanced 12 per cent in the three months, Riyad Capital said in a report on September 29.
Arqaam Capital expects the nation's banks to post 8.7 per cent profit growth in the quarter, exceeding 5.4 per cent for lenders in Qatar, 1.3 per cent in the United Arab Emirates and a decline of 3.5 per cent in Kuwait. Borrowing costs surge Saudi interbank borrowing costs surged the most in the Gulf Cooperation Council (GCC) this year as property developers and petrochemical makers sought funds to take part in a government- led plan to build roads, airports and affordable housing.
Loans to private businesses grew the most in more than three years in August, while issuers including Saudi British Bank and food producer Almarai sold a record $8 billion of debt this year. "Increased demand for credit reflects the continuing economic expansion," Monica Malik, Dubai-based chief economist at EFG-Hermes Holding, said by e-mail.
"We expect to see a pickup in demand for corporate credit from September, when we expect to see a strengthening in investment activity."
New projects Saudi Arabia's $597 billion economy will grow 5.1 per cent this year, the second-fastest pace in seven years, according to the median forecast of 17 economists compiled by Bloomberg. By contrast, growth in the Group of 10 industrialised nations will slow to 1.27 per cent from 1.31 per cent, the forecasts show.
Momentum from government spending plans amounting to $514 billion has prompted private companies to pursue new projects. Jabal Omar Development, based in Mecca, agreed on a five billion-riyal ($1.33 billion) loan agreement last month for a real estate project in Islam's holiest city.
Al-Rajhi Bank, the nation's biggest publicly traded lender, and five other local banks are involved in the financing. Loans to private businesses increased 15 per cent in August, the same as credit expansion in Qatar, the world's biggest exporter of liquefied natural gas, in July and above 1.3 per cent in the UAE in May, central bank data show.
Al-Rajhi may post a seven per cent increase in third-quarter net income to 2.1 billion riyals, according to the mean estimate of three analysts compiled by Bloomberg. Profit at Saudi British Bank, whose 40 per cent affiliate HSBC Holdings is the Middle East's top bond underwriter, probably grew 29 per cent, the average estimate of three analysts shows.