Finance: A Comprehensive Guide to the Saudi Financial Sector

The term finance in the Saudi market refers to a group of institutions that provide various financial services, including commercial banks, financing companies, insurance, financial brokerage, asset management, and investment funds. The financial sector serves as a link between savers and investors, providing financing solutions, asset custody services, and securities trading. Through its primary role in collecting savings and directing them towards investment, the financial sector contributes to supporting economic growth, developing infrastructure, and stimulating consumption and savings for individuals and businesses. In Saudi Arabia, the financial sector plays a pivotal role in implementing the Vision 2030 plans, supporting the financing of major projects, enabling startups and small businesses to access funding, and providing insurance and financial protection services to the community.

The finance sector in Saudi Arabia is subject to a comprehensive regulatory system overseen by two main entities: the Capital Market Authority (CMA), which regulates the securities market, disclosure, and investor protection, and the Saudi Central Bank (SAMA), which supervises the banking and insurance sector. The Saudi financial market has undergone significant restructuring in recent years, as 'Tadawul' has become a holding company under the name of the Saudi Tadawul Group. This restructuring allows for greater transparency and oversight, supports the entry of foreign investors, and adopts electronic trading technologies. Insurance companies have also been mandated to implement IFRS 17, improving transparency in financial reporting. Regulatory bodies adopt international standards to ensure financial stability and continuously update laws to protect investors and enhance market attractiveness.

The Saudi financial sector is divided into several main components:
- Commercial Banks: Represent the backbone of the sector, controlling most banking assets. Notable banks include National Commercial Bank, Al Rajhi Bank, Riyad Bank, Alinma Bank, Bank Al-Jazira, Bank Al-Bilad, and SABB (First Bank).
- Insurance Companies: Provide life, health, auto, and property insurance services, divided between traditional and cooperative companies. Major companies include Tawuniya, Bupa Arabia, Malath, Al Rajhi Insurance, and Al-Jazira Insurance.
- Financing Companies: Specialize in financing individuals and businesses, covering areas such as real estate financing, consumer financing, and project financing.
- Brokerage and Asset Management Companies: Provide securities trading services and manage portfolios and investment funds, playing a crucial role in developing the financial market and increasing its liquidity.

According to the latest data (2024), the total market capitalization of all companies listed on Tadawul is approximately 11–12 trillion Saudi Riyals. Financial sector companies (banks, insurance, and financing) account for about 35–40% of this value, reflecting the importance of this sector in the national economy. The market includes more than 50 companies classified within the financial sector, including about 8–9 major banks and 32 insurance companies. The weight of the financial sector is reflected in the performance of the main index (TASI), where large financial companies contribute to driving the index and achieving record levels in market capitalization and liquidity.

The financial sector in Saudi Arabia shows strong financial indicators during 2024. The main market index (TASI) has risen to levels exceeding 11,000 points, compared to around 9,500 points in early 2023, with a significant part of this growth attributed to the performance of major banks and insurance companies. Banks recorded increases in operating revenues and net profits, driven by rising interest rates and increased lending. The cash distribution yield for major banks ranges between 3–5% annually. In insurance companies, the distribution ratios vary according to profitability results, with some reaching 5–6%. The quality of banking assets and the improvement in non-performing loan ratios stand out as supportive factors for confidence in the sector.

Interest rates and liquidity directly affect the profitability of the financial sector. The Saudi Central Bank (SAMA) raised interest rates during 2022–2023, leading to increased bank profits from net interest income, as interest collected on loans and financing rose against a slight increase in deposit costs. This positive spread enhanced the financial results of banks in 2024. However, high interest rates put some pressure on borrowers, which may increase long-term default risks. On the other hand, liquidity has improved with rising oil revenues and increased government spending, supporting loan growth and increasing trading in the financial market.

Regulatory frameworks and corporate governance play a crucial role in the stability and growth of the financial sector. The Capital Market Authority has launched initiatives to enhance disclosure, protect investors, and implement international transparency standards. The application of IFRS 17 on insurance companies has been enforced to improve the accuracy of financial reporting. The CMA monitors trading activities and ensures that listed companies comply with disclosure rules and governance of boards of directors. In this context, SAMA oversees the quality of assets and capital adequacy in banks and financing companies, applying anti-money laundering policies and compliance with international standards. These combined measures enhance investor confidence and support the market's attractiveness to local and foreign investors.

The Saudi financial sector has witnessed significant progress in digital services and financial technology (Fintech). Major banks have launched advanced banking applications and offered electronic wallet services, while startups have obtained licenses to provide digital banking services such as 'Al-Awwal Digital' and 'Babsoor'. These innovations enhance financial inclusion and provide customers with a smoother and more flexible experience in managing their accounts and trading stocks. Digitization has also led to reduced operational costs and increased customer bases, but at the same time increased competition between traditional banks and emerging digital companies, pushing institutions to continuously develop their services.

The Saudi financial sector benefits from multiple growth opportunities driven by Vision 2030, which focuses on diversifying the economy and developing new sectors such as tourism, entertainment, and manufacturing. This translates into increased demand for financing, insurance, and asset management services. Additionally, urban expansion and the growth of the youth demographic enhance demand for savings and investment products. Opening the market to foreign direct investments provides new liquidity and transfers international expertise to the local market. Bank and insurance company profits are expected to continue growing at stable rates in the coming years, with a shift towards digital services and increased financial awareness among the community.

Despite the robustness of the financial sector, it faces several challenges: fluctuations in oil prices affecting liquidity and government spending, risks of rising interest rates on borrowers, competition from fintech companies and digital banks, and regulatory risks associated with changing laws. Additionally, high personal debt rates and defaults on some loans may pressure the quality of bank assets. In the insurance sector, companies face risks from changing laws and accounting standards, along with intense competition between large and small firms. Geopolitical and global economic crises remain among the most significant factors that could impact foreign investment flows and market stability.

The Saudi financial sector includes a group of major commercial banks that dominate the largest market share, including National Commercial Bank, Al Rajhi Bank, Alinma Bank, Riyad Bank, Bank Al-Bilad, SABB (First Bank), and Bank Al-Jazira. In the insurance sector, companies such as Tawuniya, Bupa Arabia, Malath, Al Rajhi Insurance, Al-Jazira Insurance, and Wafa Insurance lead the scene. There are also specialized financing and investment companies competing in areas such as real estate financing, consumer financing, and asset management. Competition among these entities is fierce in providing digital services, savings products, and developing innovative investment solutions, enhancing market dynamics and stimulating innovation.

The years 2024 and 2025 have seen significant developments in the Saudi financial sector: banks announced strong financial results driven by rising interest rates and improved lending, while non-performing loan rates decreased due to economic improvement. Banks and fintech companies launched new digital services and expanded their offerings of digital banking solutions, increasing financial inclusion and the number of individual trading accounts, which reached 6–7 million accounts. On the other hand, regulatory updates were made to enhance disclosure and protect investors, with increased oversight on anti-money laundering and compliance with international standards. Forecasts indicate continued balanced growth for the sector supported by Vision 2030 projects and increased demand for financing and investment.

The rise in the number of individual trading accounts has strengthened the role of individual investors in the Saudi financial market, with their number exceeding 6 million in 2024. Individual investors contribute to increasing liquidity and diversifying the investor base, while financial institutions and investment funds hold a significant share of market capitalization. The financial market offers diverse opportunities for investors through stocks, investment funds, and bonds. With the expansion of digital services, it has become easier for individuals to monitor the market and conduct trades. However, the importance of financial analysis and consulting with specialists remains essential for making informed investment decisions that align with goals and risk levels.

Financial indicators such as stock price, price-to-earnings (P/E) ratio, and cash distribution yield reflect the financial performance of companies in the financial sector. The P/E ratio for major banks typically ranges between 8–15, while the yield on distributions ranges between 3–5%. These indicators illustrate profitability strength, dividend distribution policy, and stock attractiveness for income-seeking investors. For investors, it is important to compare these indicators among different companies, banks, and insurance firms, considering asset quality, capital adequacy, and annual revenue growth. Tadawul and CMA reports provide high transparency regarding company performance, assisting investors in making decisions based on clear foundations.