High oil prices and interest will boost the profitability of Saudi banks

I expected Fitch Ratings, that higher oil prices and interest rates will enhance the profitability of Saudi banks During the current and next two years.

Fitch believed that an increase in interest rates by 200 basis points would boost the operating profits of Saudi banks classified by the agency by 14%.

Fitch also expected that the costs of financing Saudi banks will decline, after SAMA pumped 50 billion riyals into the banking system during the recent period.

This comes at a time when the loan-to-deposit ratio of Saudi banks is at its highest level in 15 years.

Fitch pointed out that although the largest percentage of real estate loans in Saudi Arabia depend on fixed interest, which means that banks are unable to re-price them quickly, but this is compensated by the presence of a high percentage of interest-free deposits.

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