Saudi banks carried SR3.25 trillion, about 865.2 billion dollars, in net loans at the end of the second quarter, up 7 percent from a year earlier, according to an Al Rajhi Capital review of the sector. Deposits grew faster, up 9 percent to SR3.15 trillion, leaving a loan-to-deposit ratio near 103 percent. The more revealing detail is that the three biggest banks lowered their loan-growth guidance for 2026 into single digits. When the largest institutions choose to grow their books more slowly, the question is not whether they can lend, but whether they want to at the prices on offer.
The report frames the shift as value over volume, and the numbers support the framing. Net interest margin widened to 2.96 percent, and net funded income rose 9 percent to SR32.6 billion, faster than the loan book itself. A bank that earns more from each riyal lent has less reason to chase market share at thinner spreads. That is a deliberate posture, and it is the opposite of the stance Saudi lenders held through the years when project finance and mortgage demand pushed the whole sector to grow balance sheets as fast as capital rules allowed.
The spread between corporate and retail lending explains where the growth still lives. Corporate-focused banks expanded loans about 10 percent, retail-focused lenders about 4 percent. The corporate side is where the giga-projects, contractors and industrial expansion draw credit, and it remains the engine. The retail slowdown reflects mortgages maturing as a driver after years of rapid homeownership lending, and higher-for-longer funding costs that make households more cautious about new borrowing. For a decade the mortgage push was the clearest transmission line between Vision 2030 housing targets and bank balance sheets. As that line normalizes, corporate credit to the industrial and project economy is left as the main channel through which policy ambition shows up in the loan book.
Underneath the averages, the sector is not moving in one gear. Bank AlJazira grew loans 17 percent, Bank Albilad 15 percent, and Saudi Awwal Bank 13 percent, all well above the market, which is what smaller books do when they are taking share. The two largest lenders moved the other way. Al Rajhi Bank held SR762.1 billion and Saudi National Bank SR739.56 billion, each up only 3 percent. The giants are managing margin and capital; the mid-tier is still expanding. A sector average of 7 percent hides that divergence.
The funding picture is the quiet constraint. Deposits growing faster than loans, and a loan-to-deposit ratio above 100 percent, mean banks are still leaning on wholesale and term funding to bridge the gap. That is manageable while margins are widening, because the extra income covers the cost. It becomes the binding question if deposit competition intensifies or if rates fall and compress the spread that is currently making slower growth pay.
What to watch is whether the value-over-volume stance survives a change in the rate environment. Wider margins reward restraint today. If funding costs ease, the same banks that trimmed guidance may find room to lend faster again, and the sector's discipline will be tested by the return of cheaper money rather than by any shortage of borrowers.