Saudi corporate loans grew by 60% to 1.6 trillion riyals within 4 years
Total Lendingto the corporate sector in Saudi Arabia increased by 60% during the period between 2021 and 2024, to 1.6 trillion riyals, from about one trillion riyals.
A report showed that lending to companies Saudi Arabialisted increased by between 10 and 12% during the same period, driven by the utilities, real estate, healthcare and transportation sectors. "Except for Aramco"
The banking sector
The report expects that lending to companies will remain the main driver of The banking sector of Saudi Arabia.
The report indicated that despite the increase in corporate debt and the increase in financing needs during the period preceding the year 2030, the credit risks of the corporate sector in Saudi banks are expected to remain under control thanks to the moderate improvement in corporate indebtedness.
Corporate Indebtedness
According to the report, the average indebtedness of listed Saudi companies has improved according to estimates to between 1.6 and 1.9 times in 2024 from an average range of Between 2.0 and 2.3 times in 2020, thanks to the strong performance that mitigated the growth in capital spending by between 65% and 70% during this period.
According to the report, lending to companies currently represents between 55 and 60% of banks’ loan books, and despite increasing corporate debt and the possibility of continued high financing needs in the period leading up to 2030, S&P expects Global Credit Ratings believes that Saudi banks’ exposure to credit risks for the corporate sector remains limited. This is due to the moderate improvement in corporate debt, supported by strong performance during the period between 2020 and 2024.
Bank loans
The report revealed that total bank loans in Saudi Arabia rose to 3 trillion riyals, from 2 trillion riyals.
The report said: In addition to local bank financing, the pace of external debt accumulation has accelerated, not only on banks and the government, but on the corporate sector as well, with a noticeable increase in bond issuance, while the sector is still under The dominance of the Saudi sovereign wealth fund, the Public Investment Fund, and Aramco.
The report expected that debt capital markets would play an increasing role as a source of financing for debt, while the total debt owed by listed Saudi companies decreased by about 15% between 2020 and 2024.
Aramco paid off $60 billion in debt
It pointed out that most of this decline resulted from Aramco paying off its debts and reducing debts in the materials sector. Led by the Saudi Arabian Mining Company "Minerals"And the Saudi Basic Industries Corporation (SABIC) with a value ranging between 55 and 60 billion dollars.
The report added that, with the exception of Aramco, the data indicate an increase ranging between 10 and 12% in total debt during this period, driven by the utilities sectors, real estate investment funds, health care, and transportation.
The report indicated that the average share of short-term debt in total debt remained broadly stable in all sectors at between 35 and 36% during the period between 2020 and 2024, noting a large variation depending on the sector.
He stated that the sectors with the greatest need for financing working capital, such as consumer durables, clothing, medicines and capital goods, depend more on short-term financing, while they may face refinancing risks in the event of a decline in performance.
The short-term debts of listed companies recorded a growth that ranged between 25 and 27%, exceeding the growth that ranged between 10 and 12% in total corporate debt.
Short-term credit – at the banking system level – decreased as a proportion of total loans to 36% in 2024 from 39% in 2020, and from 66% in 2000.
The report attributed this largely to the rapid rise in long-term mortgage loans.
Reduced corporate debt
The ratio of total debt of listed Saudi companies improved to EBITDA during the period between 2020 and 2024, reflecting the rise in borrowing.
This came thanks to the strong expansion in profits during that period. While the report estimated the average ratio of total debt to EBITDA for listed Saudi companies at between 1.6 and 1.9 times in 2024, down from an average of between 2.0 and 2.3 times in 2020.
Among the notable exceptions are the consumer-oriented sectors with the highest indebtedness, such as clothing, retail trade, distribution, and basic commodities, as well as food and beverages.
The report magnified the report. This is partly due to the limited number of companies included in the sample on which the report was based, as well as to competitive pressures, higher costs, especially fuel costs, and lower profit margins in general.
Non-performing loans improved
Non-performing loans and second-stage loans improved, which reflects the trend in corporate indebtedness.
Saudi banks’ exposure to corporate credit risks benefits from the decrease in corporate indebtedness in general compared to their global counterparts.
According to the report, for example, the percentage of total Debt to EBITDA of more than 4.0 times at the end of 2024, a ratio much higher than estimates for Saudi listed companies of between 1.6 and 1.9 times.
The report identified several reasons for this, including: the preference for financing capital expenditure through internal cash flows, the dominance of family-owned or government-owned companies, which limits the appetite for debt, and financing the economy through bank lending, which reflects the conservative underwriting standards of banks. and regulatory restrictions.
Reasons included: Limited tax incentives from higher debt as a result of the low zakat rate of 2.5% for Saudi companies.
Consolidated revenues
According to the report, the total combined revenues and EBITDA of listed companies excluding Aramco recorded an average compound rate growth of between 8% and 10% during the period extending between 2020 and 2024.
EBITDA growth trailed revenue growth slightly due to cost inflation, including fuel and shipping costs, rising wages, due to rising Saudization rates – companies must employ a certain percentage of Saudi citizens – and competitive pressures.
The report stated that in some sectors where EBITDA growth significantly exceeded revenue growth, this was primarily due to The report said: Asset-intensive sectors with relatively high capital requirements will need to improve profits compared to historical losses, which makes the improvement appear exaggerated. Maintaining a certain degree of indebtedness as the economy goes through the investment cycle.
The energy, healthcare, food and beverage, telecommunications, and utilities sectors record the highest investments as a percentage of revenue, since a large number of projects in Saudi Arabia fall within these strategic sectors.
The seven largest capital-intensive sectors represented about 94% of total capital spending in 2024, about 37% (excluding Aramco).
Total capital spending for the sample increased By a rate that ranged between 65 and 70% during the period between 2020 and 2024 (excluding Aramco).
This was the case for all sectors except the pharmaceutical, software and services sectors.
The food and beverage sector witnessed a significant growth in investments as Saudi Arabia expanded its production capacity, enhanced food security and adapted to changing consumer preferences.
According to the report, investments remain mainly in the materials (chemicals) sectors. (Telecommunications) is significant as Saudi Arabia strengthens its capabilities in next-generation mobile and broadband technologies, in addition to artificial intelligence, data centers and submarine cables.
Loans to companies rose by about 60% during the same period, which is largely in line with the growth in capital spending.
The report expected that capital spending for classified Saudi companies, which are among the largest companies in the Kingdom, will rise by about 5% on average during the period extending between 2025 And 2026, and thus will continue to drive credit growth.
It pointed out that only a portion of this capital spending will be financed by debt, thanks to the healthy generation of corporate free operating cash flow (free operating cash flow = operating cash flow minus capital spending).
The report added that on an aggregate basis, free operating cash flow has remained strong over the past few years, with the obvious exception of the utilities sector in 2024.
/>This was the result of a significant increase in capital spending to finance new capacity, modernization works and other initiatives in line with the Kingdom’s Vision 2030.
On an individual basis, free operating cash flow was negative for about a third of listed companies in 2024, and this has been the case for several years for many of them, which explains the growth in borrowing.
In addition, despite the steady increase in dividends in almost all sectors, overall discretionary cash flow remained (Free operating cash flow minus dividends) is positive for listed companies except Aramco. But on an individual basis, more than 40% of these companies are estimated to have recorded negative estimated cash flows in 2024, which increases their financing requirements.
Borrowing costs and credit risks
The report expected that the credit quality of rated Saudi companies will remain relatively stable despite the significant financing needs for capital spending, investments, digital transformation and sector diversification.
This was mainly due to the growth opportunities of the non-oil sector that Created by Saudi Vision 2030 and the strong profitability resulting from lower costs.
He said: It is likely that these factors will contribute to alleviating the slowdown in revenue growth in light of increasing competition in some sectors and oil prices remaining in the range of $60 per barrel in expectations for the year 2026 and $65 per barrel as of 2027.
The report expected that lowering interest rates, which the Saudi Central Bank is expected to reduce By 25 basis points later in 2025 and another 50 basis points in 2026, Saudi companies’ interest coverage will improve and therefore their borrowing capacity. The report expects these metrics to witness a greater recovery starting in 2025, with the repricing of corporate loans, the majority of which are at a floating interest rate.
Credit Risk
The report expects credit growth to remain high, at about 10% in the next 12 to 24 months, driven by large financing needs for investments. This exposes banks to shifts in the creditworthiness of companies, which may be vulnerable to execution risks or cost overruns.
He pointed out that the decline in oil and petrochemical prices for a long period may also change investor sentiment and increase pressure on these sectors if the surplus supply continues to contribute to lower prices.
He added that what exacerbates these risks is that banks finance growth by relying more on external debt. The net external debt of the banking sector amounted to about 5% of total domestic loans by the end of August 2025. This increases banks’ dependence on global credit conditions and exposure to shifts in international investor interest.
He pointed out that what partly mitigates these risks is the fact that the relevant authorities in Saudi Arabia provide significant support to its banking sector.
According to the report, Saudi Arabia’s relatively low public and private debt burdens, supported by huge sovereign reserves, provide a strong margin. As the non-oil economy continues to expand, banks will need to balance growth opportunities with prudent risk management, ensuring that credit expansion supports diversification without amplifying risks.
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