Saudi banks brace for corporate loan surge in 2026

Saudi lenders are expected to extend between $65 billion and $75 billion in new corporate loans in 2026, underpinned by sustained investment flows into real estate and utilities and a broad pipeline of state-backed projects, according to an assessment by S&P Global. The projection points to another year of robust balance-sheet expansion as banks continue to finance the kingdom’s economic transformation agenda.

The forecast follows a strong lending cycle through 2025, when corporate loans reached about $70 billion between December 31, 2024 and November 30, 2025. That expansion reflected continued demand from large-scale developments tied to Vision 2030, as well as improving credit conditions that allowed banks to price long-tenor funding more competitively. Analysts say the momentum heading into 2026 appears intact, supported by a mix of government spending, private-sector participation and deepening capital markets.

Banks eye larger corporate books in 2026

S&P Global said corporate lending would continue to benefit from opportunities created by Vision 2030 projects, which span housing, transport, energy transition and digital infrastructure. Real estate remains a core driver, with banks financing residential communities, mixed-use commercial districts and logistics hubs aligned with population growth and urbanisation plans. Utilities, including power generation, water and grid upgrades, are also drawing significant credit as capacity expands to meet industrial and household demand.

Bank executives and market participants note that lending growth is being shaped not just by volume, but by structure. Syndicated loans, project finance and sustainability-linked facilities are accounting for a larger share of new issuance, allowing lenders to manage risk while meeting borrower requirements. Longer maturities and staged drawdowns are increasingly common, reflecting the scale and duration of construction cycles.

Capital adequacy and liquidity metrics remain supportive. Strong deposit growth, aided by higher government and corporate balances, has provided banks with ample funding to extend credit without undue pressure on loan-to-deposit ratios. While margins have moderated as interest rates eased, fee income from advisory roles and syndications has helped offset the impact on profitability.

Retail lending is also set to expand in 2026, with mortgages leading growth as borrowing costs continue to trend lower. Mortgages account for roughly half of total retail lending, which rose by about 5 per cent in the year to November 30, 2025. Housing demand has been supported by demographic factors, policy incentives and a steady pipeline of new supply, encouraging banks to maintain a strong focus on home finance.

The interplay between corporate and retail books is shaping balance-sheet strategy. Some lenders are prioritising corporate exposure to capture scale opportunities linked to national projects, while others are balancing growth with retail portfolios that offer granular risk and stable returns. Digitalisation of credit processes and improved data analytics are enabling faster underwriting and more targeted product offerings across both segments.

Risk management remains a central consideration. Analysts expect asset quality to stay resilient, supported by government backing for priority projects and conservative underwriting standards. However, exposure concentrations in certain sectors, particularly construction and property development, are being monitored closely. Banks have increased stress testing and covenant protections to mitigate potential volatility linked to execution risks or shifts in demand.

Regulatory oversight and macroprudential frameworks continue to influence lending behaviour. Supervisory authorities have encouraged prudent growth, with guidance on capital buffers and provisioning designed to preserve system stability as credit expands. The sector’s strong capitalisation provides a cushion, allowing banks to absorb shocks while continuing to fund economic activity.

Beyond domestic drivers, regional integration and foreign investment are adding momentum. Cross-border partnerships and international contractors participating in large projects often require local financing, creating additional opportunities for Saudi banks to deepen relationships and expand their corporate client base. At the same time, the development of debt capital markets offers alternative funding channels, complementing bank lending rather than displacing it.