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RIYADH: Saudi banks’ aggregate profit before zakat and tax reached SR8.24 billion ($2.2 billion) in July, marking a 7 percent increase compared to the same month last year.  

Latest data from the Saudi Central Bank, also known as SAMA, show that this robust monthly showing lifted cumulative profits for January to July to about SR59.24 billion, an 18 percent rise over the same period in 2024, highlighting the sector’s strong growth trajectory.    

Regionally, performance mirrors the broader Gulf Cooperation Council upswing. In its September report, Kamco Invest said GCC-listed banks’ net profit hit a record $16.2 billion in the second quarter, powered by broad-based revenue gains and a lower cost-to-income ratio that more than offset higher impairments, underscoring robust fundamentals and a healthy project pipeline across the region.  

In ������Ƶ, lenders also operate with one of the GCC’s highest loan-to-deposit ratios, at 94.3 percent, reflecting credit demand that outpaces deposit growth.   

A major driver of Saudi banks’ earnings is soaring corporate lending, as the Kingdom’s lenders finance megaprojects and businesses aligned with Vision 2030’s diversification plan. Total outstanding bank credit hit SR3.2 trillion in July, up 15.21 percent year on year.   

Notably, business loans grew 22.5 percent to SR1.8 trillion, now comprising about 56.23 percent of total lending, up from roughly 53.46 percent a year ago.  

Such growth underscores Saudi banks’ critical role in propelling the Kingdom’s economic diversification, funding everything from giga-projects and infrastructure to housing and small businesses.  

Real estate has been a key beneficiary, buoyed by rising homeownership initiatives and megaprojects like NEOM, but other sectors are also expanding their borrowing.  

For instance, trade, utilities, manufacturing, and other sectors all saw healthy double-digit loan growth in SAMA’s latest figures.  

Elevated interest rates, higher margins  

Despite the rapid credit growth, Saudi banks have navigated a high-interest-rate environment that has prevailed globally. Borrowing costs remain elevated as the US Federal Reserve has yet to ease policy in 2025, following only modest reductions late in 2024.  

An August Reuters poll found 61 percent of economists expect a 25-basis-point cut on Sept. 17, taking the target range to 4.00–4.25 percent, while 42 percent expect no change. Over 60 percent foresee one or two cuts in 2025 overall.  

For Saudi banks, SAMA’s mirroring of elevated Fed policy has widened lending margins, lifting interest income.  

Crucially, demand for credit has stayed strong despite the costlier loans, a testament to the strength of ������Ƶ’s economy and project pipeline. In other words, companies and consumers are continuing to borrow for expansion and housing, driven by confidence in economic prospects, even as interest rates hover at multi-year highs.  

Outlook: profitable growth and new financing avenues  

Going forward, industry forecasts point to sustained strong performance for Saudi banks. S&P Global Ratings expects lending growth of around 10 percent in 2025, mainly driven by corporate credit tied to Vision 2030 projects.  

It projects that banks will maintain stable profitability next year, as higher loan volumes are set to offset a modest dip in net interest margins once domestic rates begin to ease in tandem with the US.   

Meanwhile, Fitch Ratings echoes this optimism, forecasting that Saudi banks will “continue outpacing Gulf peers in 2025,” with sector financing rising about 12 percent on the back of sturdy corporate credit demand.  

Fitch and S&P both emphasize that earnings should remain solid even if interest margins narrow slightly, given the Kingdom’s robust non-oil growth and banks’ ample capital buffers.  

Banks are also innovating their funding strategies to support future growth. In August, the Saudi Real Estate Refinance Co., a state-owned entity, launched the Kingdom’s first residential mortgage-backed securities issuance, after receiving SAMA’s approval.  

This inaugural securitization packaged a portfolio of home loans into bonds, marking a “strategic step toward developing ������Ƶ’s real estate finance market and enhancing its appeal to investors,” according to Majid Al-Hogail, minister of municipalities and housing and chairman of SRC’s board.  

The deal is expected to improve liquidity and risk management in the booming mortgage sector as banks currently hold more than $180 billion in home loans, by allowing lenders to refinance and sell off mortgages to investors  

Such moves will free up bank balance sheets and provide fresh capital for new lending, especially important as housing demand remains robust under Vision 2030’s goal of 70 percent homeownership.  

With healthy capitalization, at 19 percent capital adequacy, and prudent provisioning, Saudi banks appear well-positioned to sustain growth while absorbing risks.  

Potential challenges like tighter global liquidity or geopolitical risks are being watched, but so far, the Kingdom’s macroeconomic fundamentals and policy reforms have underpinned confidence in its banking system.  

Saudi banks’ continued strong credit growth, innovation in funding, and alignment with national goals give rating agencies and experts optimism that the sector will maintain its upward trajectory, supporting the Kingdom’s economic transformation in the years ahead.

RIYADH: ������Ƶ’s deserts are fast becoming the new frontier for hyperscale data centers, offering vast land, natural resilience, and strategic positioning that traditional global tech hubs struggle to match.

The Kingdom’s geologically stable terrain faces little risk from earthquakes or flooding, making it an ideal base for mission-critical digital infrastructure. Market revenue is projected to reach $2.07 billion in 2025 and expand to $2.83 billion by 2030, growing annually at 6.45 percent, according to Statista.

Turki Badhris, president of Microsoft Arabia, said the desert landscape provides a rare opportunity to build at scale without the limitations of legacy infrastructure.

“Unlike traditional global tech hubs, the Kingdom’s open terrain allows for purpose-built facilities with fully independent power, cooling, and networking systems. This kind of scale and flexibility is challenging to achieve in crowded global tech hubs,” Badhris said.

Fady Chalhoub, partner at PwC Middle East, noted that hubs such as Singapore and Zurich face constraints from land scarcity, high real estate costs, and strict regulations. By contrast, ������Ƶ combines affordable land with state-backed investment in subsea and terrestrial fiber routes linking Europe, Asia, and Africa.
“This combination of low-risk geography, strategic location, and government-backed infrastructure development presents a compelling value proposition for hyperscale providers seeking to expand beyond traditional hubs,” he said. 

Houssem Jemili, consultant at Bain & Co., added that abundant land, ultra-low-cost solar power, and a dry climate suitable for passive cooling strengthen the Kingdom’s appeal. Government support, he said, “provides financial incentives, infrastructure, and regulatory ease,” while proximity to subsea cables enhances global connectivity.

Energy and innovation advantage

The Kingdom is also leveraging renewables to power its data economy. Chalhoub emphasized the role of solar and green hydrogen in cutting emissions and lowering operating costs. He said despite extreme heat, the region’s low humidity makes advanced cooling techniques viable.
“Solutions such as liquid and immersion cooling, including direct-to-chip technologies, are increasingly viable in this environment, supported by the availability of land, progressive regulation, and an innovation-friendly policy landscape,” he said.

He added: “������Ƶ is prioritizing the development of dedicated digital zones and infrastructure corridors,” enabling campuses tailored for AI, cloud, and quantum technologies.

Jemili pointed to the Kingdom’s intense solar irradiance as a source of ultra-cheap renewable power. The dry climate, he said, is driving the adoption of water-saving cooling systems, while land availability supports hyperscale campuses at lower real estate costs.

He noted that megaprojects such as Neom’s Public Investment Fund–backed AI data center campus show how ������Ƶ is integrating digital infrastructure into broader smart city plans. With new subsea cables strengthening its global links, the Kingdom is emerging as a “tri-continental data hub,” Jemili said.

Regional competition

������Ƶ is not alone in this race. The UAE has poured investment into AI-focused data centers, while Qatar has launched national cloud initiatives. But ������Ƶ’s scale, low energy costs, and government funding set it apart.

According to PwC, regional data capacity is set to triple — from 1 GW in 2025 to 3.3 GW within five years — fueled by surging demand for cloud computing and AI. GCC states, led by ������Ƶ, are driving this transformation through initiatives like the PIF-backed Transcendence AI Initiative and Amazon Web Services’ $5.3 billion investment.

Cost dynamics add to the edge. Industrial land in ������Ƶ ranges between $10 and $50 per sq. meter, compared with $150 to $600 in US hubs such as Northern Virginia. Power tariffs are also lower — $0.05 to $0.06 per kWh in ������Ƶ and the UAE versus $0.09 to $0.15 in the US.

Meanwhile, submarine cable projects including 2Africa, SMW6, and Gulf Gateway (GGC1) are reinforcing ������Ƶ’s connectivity with Europe, Asia, and Africa, underpinning competitive pricing.

Vision 2030 push

Hyperscale data centers are central to ������Ƶ’s Vision 2030, drawing global players such as Oracle, Google, Microsoft, and Amazon while boosting local capacity and economic diversification.

Badhris said Microsoft’s Azure cloud region was “equally about supporting the Kingdom’s broader digital ambitions under Vision 2030.
“By enabling digital transformation, creating high-value jobs, and driving innovation across industries, we are contributing to the Kingdom’s economic diversification goals,” he said. The initiative aims to generate up to $24 billion in value over four years and train more than 100,000 Saudis in cloud and AI skills by 2025.

Chalhoub noted that hyperscale infrastructure stimulates demand for AI, cloud, and cybersecurity expertise, strengthens data sovereignty, and supports startups.
“Ultimately, hyperscale datacenters are more than technical infrastructure,” he said. “They are foundational enablers of ������Ƶ’s aspirations for a knowledge-based economy, sustainable innovation, and industrial self-sufficiency.”

Jemili pointed to global momentum, citing Oracle’s $14 billion pledge and Equinix’s $1 billion Jeddah investment.
“Also, the Saudi Digital economy is expected to benefit: the data center market will triple to $3.9 billion by 2030, reflecting rising cloud and AI demand. Lastly, the data centers will support PIF’s digital initiatives such as Neom’s $5 billion net-zero AI hub,” he said.