Saudi Mortgage Growth to Aid Rebound in Lending at Al Rajhi Bank

(Bloomberg) -- A jump in mortgages and a recovery in Saudi Arabia’s economy may help Al Rajhi Bank, the kingdom’s second-biggest lender, reverse a decline in lending.

Overall lending may improve to show “low single-digit” growth this year and increase to match historical levels of expanding in mid-single digits from 2019, Chief Executive Officer Steve Bertamini said in an interview in Dubai. While its loan book contracted 1.7 percent in the 12 months through June, higher government spending and faster economic growth amid higher oil prices should help a revival, he said.

“We’ve seen our share continue to grow in the housing market and the industry as a whole is also expanding,” Bertamini said. Home loans have risen as much as 6 percent this year and there are 450,000 Saudis eligible to purchase a home under one of the government programs, he said.

Saudi Arabia’s new housing project announced in February includes an 18 billion riyal ($4.8 billion) loan-guarantee program to boost access to funding and 12.5 billion riyals to support down-payments, all to be spent through 2030. Housing policy is an especially sensitive plank of Crown Prince Mohammed bin Salman’s economic transformation plan as many Saudis say they’re unable to afford homes or obtain financing.

Profit Climbs

Riyadh-based Al Rajhi, the Middle East’s biggest Islamic bank, in July reported an 18 percent rise in second-quarter profit to 2.57 billion riyals, beating analyst estimates. Saudi Arabia’s economic expansion will accelerate to 1.6 percent this year from 0.9 percent in 2017, according to the median estimate of 14 economists compiled by Bloomberg.

Corporate-lending growth was “somewhat muted” in the first half, while some of the larger transactions were “relatively thinly priced, so we have not participated in those,” Bertamini said. “There will be more opportunities to grow, especially in the corporate sector, as we get into next year as we expect growth to pick up.”

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Vernon Wessels, Andrew Blackman

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