The external debt of Saudi banks is stable despite the challenges until 2028

Standard & Poor’s credit rankings expected that the net external debt of Saudi banks would remain at a safe level of 4.1% of the total lending by 2028, despite the increase in external financing to support Saudi Vision 2030 projects.

External financing for Saudi banks

The agency confirmed that Saudi banks went to external financing after local sources became insufficient to meet the increasing demand for loans. In 2024, banks granted new loans worth 371.8 billion riyals (equivalent to 100 billion dollars), while they registered a growth in deposits by only 218.9 billion riyals, which necessitated the need for a re -financing of about 152.9 billion riyals.

The report suggested the continuation of this trend during the three years to the next five, without this constituting a great source of weakness for Saudi banks.

Support for the growth of Vision Vision 2030

The report explained that external financing will contribute to supporting bank expansion and financing of projects related to the Kingdom’s 2030 vision, pointing to the rapid growth witnessed by Saudi banks recently, especially in the real estate financing sector until the end of 2022, supported by local financing.

Dependence on international financing

The report indicated that Saudi banks recently increased their dependence on global capital markets, due to insufficient local financing to meet the ambitious requirements of economic growth.

Until the end of 2024, banks moved to the net of a small external debt center of 34 billion riyals.
Most external debts were deposits between banks and re -purchase agreements, as liabilities between banks contributed 55% of the total external debt growth.

Sources and risks of external religion

According to the report, the dues of foreign banks reached 59% of the total external debt, which is a potential source of risk due to the nature of these short -term financing.
The percentage of dues to Saudi banks with foreign banks also decreased to 54% by the end of 2024 compared to 109% in 2022, which may expose banks to the possibility of a sudden escape of funds.

However, the report stressed that this scenario is not part of the basic expectations thanks to the expected stability of the deposits of the Gulf Cooperation Council states, as well as strong government support expected in case of necessity.

External debt growth and real estate financing solutions

The total external debt of Saudi banks reached $ 109.5 billion by the end of 2024, compared to only $ 29.5 billion at the end of 2018.

In the context of their endeavor to enhance funding, banks began to transfer some assets outside their public budgets by selling real estate financing to the Saudi Real Estate Re -Finance Company, which bought funds worth 28.8 billion riyals until the end of 2024.

Challenges to transfer real estate financing

The report identified 3 reasons for the banks not boldly directed to sell real estate financing despite their large (about 180 billion dollars or 23% of the total loans):

1. High profitability for modified real estate financing by risk.

2. The effect of interest rates; As some old loans have become less profitable with a recent high interest.

3. Investors concern about the legal risks and guarantees related to securities backed by mortgage.

The future of the real estate securities market

Standard & Poor’s expected a Saudi mortgage -backed securities market gradually appearing in the coming years, while continuing to increase the external debt of banks to finance local growth and meet the requirements of the national vision.