Prime Highlights:
The money supply of Saudi banks has increased by 10.3 percent on year up to November 2024, reaching a total of SR2.95 trillion, equivalent to $785.51 billion.
Time and savings deposits rose 18.10 percent from last year, to reach a level accounting for 33.61 percent of the money supply, or SR989.99 billion, their biggest share in more than 15 years.
Demand deposits account for 48.76% of the money supply, which decreased a little from 50% in 2023 but increased by 7.69%.
Key Background:
Saudi banks have seen significant growth in their money supply, which reached SR2.95 trillion ($785.51 billion) in November 2024, marking a 10.3% increase year-on-year, according to data from the Saudi Central Bank (SAMA). Notably, time and savings deposits accounted for 33.61% of the money supply, or SR989.99 billion, representing the highest share in the past 15 years. These deposits grew by 18.10%, the fastest rate among all components of the money supply. Demand deposits, the largest component, comprised 48.76% of the money supply, slightly down from 50% in the previous year but still reflecting a 7.69% increase. Other components made up 17.63%.
Analysts attribute the rise in term deposits to higher interest rates and tightening liquidity conditions. Edmond Christou, senior industry analyst at Bloomberg Intelligence, noted that the financing of Saudi Arabia’s Vision 2030 mega projects has driven banks to issue euro-denominated medium-term notes. Additionally, SAMA’s strategic placement of state funds in time deposits has bolstered bank cash flows, along with open market operations and substantial debt sales.
Although loan growth has risen by 13.33% year-on-year, deposit growth has been slower at 10.52%, creating a temporary funding gap. Banks have responded by offering higher yields on term deposits to attract necessary funds. This demand for credit is fueled by major projects, including the development of cities like NEOM under Vision 2030.
The loan-to-deposit ratio for Saudi banks stands at 82.16%, indicating effective liquidity management. The sector has adapted to market changes through alternative funding sources, such as debt issuance. However, ongoing regulatory adjustments may be required to ensure sustainable long-term growth.
