Banks in Saudi Arabia: A Comprehensive Overview of the Banking Sector and Its

The official activity of banks in Saudi Arabia began in the 1950s with the establishment of the first local banking institutions and the opening of foreign bank branches. The sector gradually developed to include major national banks, followed by the emergence of Islamic banks in the 1970s, which enhanced the diversity of banking products and services. The 1980s and 1990s saw significant expansion driven by increased demand for real estate and commercial financing, accompanied by advancements in financial regulations and the establishment of the Saudi Central Bank (SAMA) as a regulatory authority. Over the past two decades, the number of banks and the diversity of their activities have increased, with the sector playing a greater role in financing large government and infrastructure projects. Disclosure and governance requirements from the Capital Market Authority have improved transparency and increased trust in the sector. Today, the Saudi banking sector is among the most stable and advanced in the region, continuing its rapid digital transformation.

The Saudi banking sector comprises several types of banks: conventional commercial banks, Islamic banks, specialized banks (such as real estate finance), and branches of foreign banks. Commercial banks (such as Saudi National Bank and Riyad Bank) focus on providing comprehensive services to individuals and companies, including current accounts, savings, lending, electronic services, and project financing. Islamic banks (such as Al Rajhi, Alinma, and Aljazira) adhere to Sharia principles in all transactions, offering alternative financing products like Murabaha, Mudaraba, and Ijara. There are also specialized banks such as the Social Development Bank and the Real Estate Development Fund, which support specific sectors in line with government policies. Foreign bank branches focus on corporate finance and facilitating international trade. This diversity gives the sector flexibility to face economic challenges and serve a wide range of society and the national economy.

SAMA is the main regulatory authority for the banking sector in Saudi Arabia, setting monetary policies and monitoring banks’ compliance with international standards (such as Basel capital adequacy requirements). SAMA enforces strict requirements on cash reserves, liquidity ratios, and credit risk management. Its role extends beyond supervision to developing financial infrastructure and enhancing confidence in the banking system. SAMA also issues periodic reports on bank performance and guides banks to improve asset quality and manage non-performing loans. Additionally, SAMA updates regulations to keep pace with technological developments, such as licensing digital banks and encouraging innovation in electronic banking services. These policies contribute to sector stability, depositor protection, and the competitiveness of Saudi banks regionally and internationally.

Banks in Saudi Arabia recorded continuous growth in assets, deposits, and profits during 2024 and 2025. The total assets of the banking sector reached several trillion riyals, with major banks holding the largest share. Deposit balances grew by about 5-8% annually, driven by increased customer confidence and an improved economic climate. Net profits of major banks grew by 10-15% compared to the previous year, due to improved interest margins and higher lending volumes to individuals and companies. The loans-to-deposits ratio exceeded 85%, reflecting a healthy balance between lending and liquidity. Banks also maintained high coverage ratios for non-performing loans (1-3%), indicating high quality in their loan portfolios. This strong financial performance reflects the sector’s resilience and ability to withstand economic challenges.

Several banks lead the Saudi banking sector in terms of assets, market value, and profits. The most prominent are: Saudi National Bank (SNB), which became the largest after the merger of NCB and Samba; Al Rajhi Bank, the largest Islamic bank and one of the most profitable in the region; Riyad Bank, Saudi Fransi Bank, Arab National Bank, Alinma Bank, Bank Albilad, and Bank Aljazira—all playing pivotal roles in corporate finance, major projects, and retail services. These banks hold more than two-thirds of the sector’s assets, and their shares represent about 30-40% of the market capitalization of the Saudi Stock Exchange (Tadawul). They are distinguished by strong financial positions, diverse products, and the ability to keep pace with digital transformation, while seeking regional and international expansion.

Islamic finance is a main pillar of the Saudi banking sector, with banks such as Al Rajhi, Alinma, and Aljazira competing to offer Sharia-compliant products. These banks rely on financing tools such as Murabaha, Mudaraba, Ijara, and Sukuk instead of interest-based lending. This model is widely popular among clients who prefer Sharia-compliant transactions. Islamic banks also finance real estate, education, and healthcare projects, and support community initiatives. They are subject to internal Sharia supervisory boards in addition to conventional banking oversight. The success of Islamic banks in Saudi Arabia has driven their regional expansion and set a benchmark for innovation in Sharia-compliant finance.

Saudi banks have undergone a major shift toward digital services in recent years, supported by SAMA policies and the banks’ own initiatives. Advanced banking apps now allow customers to open accounts, make transfers, manage investments, and pay bills electronically. Banks have also made it possible to open fully digital accounts without visiting branches. Fully digital banks, such as the Saudi Digital Investment Bank, have emerged. Additionally, electronic payment solutions have been developed, information security has been enhanced, and e-wallet services such as STC Pay have expanded. Digital transformation has boosted banks’ competitiveness, improved operational efficiency, reduced costs, and enabled access to new customer segments, particularly youth and professionals.

Despite the strong growth of the Saudi banking sector, several challenges remain. Key challenges include the impact of global interest rate fluctuations, rising financing costs, and increased competition from digital banks and fintech companies. Banks also face challenges in managing non-performing loans, maintaining high liquidity levels, and complying with Basel international standards. On the other hand, Vision 2030 offers tremendous opportunities for the sector through financing major projects in tourism, industry, and technology. Digital transformation allows banks to expand their customer base, reduce costs, and increase revenues from new services. The ability of Saudi banks to turn these challenges into opportunities depends on their capacity for innovation, risk management, and strengthening partnerships with the public and private sectors.

Banks in Saudi Arabia compete fiercely to attract customers by developing products, improving digital services, and offering competitive financing rates. Competition extends beyond the local market to the regional level, especially with Gulf banks in investment and real estate sectors. Some Saudi banks are also expanding into promising international markets in Asia and North Africa. Locally, digital wallets and fintech companies are non-traditional competitors, prompting banks to accelerate digital transformation. Despite competition, Saudi regulatory policies ensure sector stability and give local banks a relative advantage, while encouraging partnerships and innovation.

Saudi banks are known for their relatively consistent dividend policies, typically distributing 50% to 80% of annual net profits to shareholders, depending on liquidity, reserves, and the bank’s risk outlook. In 2024, dividend payouts at major banks such as SNB and Al Rajhi ranged from 4 to 6.5 riyals per share, representing an annual yield of 1% to 4% based on share price. Dividend policies depend on financial performance, board recommendations, and regulatory requirements from the Capital Market Authority and SAMA. The commitment of Saudi banks to sustainable cash dividends enhances the attractiveness of their shares to investors seeking regular income.

Saudi banks place great emphasis on risk management and asset quality, in line with international standards and SAMA guidelines. Banks maintain high provisions to cover non-performing loans and continuously monitor the quality of their credit portfolios using advanced rating systems. The coverage ratio for non-performing loans typically ranges from 1% to 3%, reflecting strong preventive policies. Banks also diversify their portfolios across various economic sectors (real estate, industry, retail) to mitigate risks from market fluctuations. This approach strengthens the sector’s financial stability and protects it from local and global economic shocks.

Banks in Saudi Arabia play a central role in achieving the goals of Vision 2030 by financing mega-projects in infrastructure, tourism, housing, and renewable energy. The vision encourages full digital transformation of the financial sector, increased employment of national talent, and innovation in financial products and services. It also supports the expansion of financing for small and medium enterprises and the improvement of financial inclusion. Banks’ commitment to supporting Vision 2030 programs has provided opportunities for accelerated growth, attracted foreign and local investment, and increased the banking sector’s contribution to GDP.

In recent years, the Saudi banking sector has witnessed a wave of mergers and acquisitions that have reshaped the market landscape, most notably the merger of National Commercial Bank and Samba to form Saudi National Bank (SNB), strengthening its position as the largest bank in the Kingdom and the region. Other banks are also in talks for restructuring or merging to enhance efficiency and expand asset bases. Additionally, Saudi banks have launched numerous digital initiatives and entered partnerships with global tech firms to develop electronic payment and blockchain services. These developments reflect the sector’s dynamism and readiness to keep pace with economic and technological changes.