Fitch: Saudi's Non-oil GDP Growth, Big Spend Pave Way for 'Solid' Growth Opportunities for Banking Sector

02:16 AM EST, 12/09/2025 (MT Newswires) -- Fitch on Monday issued rating actions on four major banks in Saudi Arabia with the main theme zeroing in on the government's "strong ability" and willingness to support domestic banks regardless of their size. In separate releases, Saudi Awwal Bank (SASE:1060) and Riyad Bank (SASE:1010) were confirmed at A-, while sector heavyweights The Saudi National Bank (SASE:1180) and Al Rajhi Banking and Investment (SASE:1120) were upgraded to A from A-. All ratings come with a stable outlook. "Healthy non-oil GDP growth, underpinned by still high government spending (although we expect growth to be contained by the country's fiscal deficit) and the government's strategy to diversify the economy as part of its Vision 2030, provides Saudi banks with solid business growth opportunities. We expect lending growth in the 10%-11% range for 2026, down from 13% in 2025," the rating agency said. With Saudi National Bank and Al Rajhi, which respectively hold the titles of the nation's largest bank by total assets and financing, Fitch said the upgrades were based on the companies having a higher systemic importance than domestic peers. Their Government Support Rating was also upgraded to a from a-. Meanwhile, Saudi Awwal Bank's marked business profile improvement and sound profitability were named as key rating drivers. Riyad Bank, as the third-largest bank in Saudi Arabia by total assets, was noted for its stable operating profit/risk-weighted assets and an expected improvement in its CET1 ratio by 2026-end. In its recent Middle East Banks Outlook 2026 report, Fitch has taken an overall "neutral" outlook on the Middle East's banking sector, saying it expects companies to weather lower interest rates as they keep their profits, asset quality, liquidity and capital buffers stable. For Saudi Arabia alone, the agency said the operating environment "remains favorable" but that a continued tightening of liquidity conditions is expected to lead to the country's above-average loan growth pace in the Gulf Cooperation Council to moderate to 10% in 2026 from the expected 13% in 2025. For the year ahead, the report also outlined slightly slower growth in the sector average CET1 ratio and for the operating profit/risk-weighted asset ratio, which is Fitch's core profitability metric, to remain stable. "Saudi banks have been reporting amongst the strongest asset quality metrics across GCC banking sectors through the cycle, and we expect that to remain the case in the medium term, albeit we expect a small 10bp uptick in the average impaired-loans ratio in 2026. In the longer term, asset quality performance will be highly influenced by the execution of giga projects and government spending," analysts wrote. Shortly after the market opened on Tuesday, Riyad Bank added nearly 1%, Saudi Awwal Bank and Al Rajhi Banking rose marginally, while Saudi National Bank was slightly down.