Saudi banks’ money supply hits $785.5B as time and savings deposits reach a 15-year high, with loan growth outpacing deposits

Saudi Arabia’s monetary landscape finished November with a broad expansion in the money supply, underscoring how banks are balancing robust loan demand with a shifting funding mix. The total money supply rose to 2.95 trillion Saudi riyals, translating to about $785.51 billion, according to official figures released by the Saudi Central Bank, known as SAMA. The year-over-year increase stood at 10.3 percent, signaling a persistent, broad-based liquidity rise amid a backdrop of higher interest rates and strategic bank actions. Within that broader tally, time and savings deposits reached a historically high share of the money stock, marking 33.61 percent or 989.99 billion riyals. The growth rate on those term deposits accelerated sharply, advancing 18.10 percent year over year.

Demand deposits continued to hold the largest portion of liquidity, accounting for 48.76 percent of the total money supply. These demand balances still grew, but at a slower pace, rising by 7.69 percent in the same period. The remaining components collectively accounted for 17.63 percent of the overall money supply, illustrating a diversified funding structure that banks are actively managing as they price risk and respond to borrowing demand. In the current environment, this breakdown signals an ongoing recalibration by lenders as they seek steadier sources of funding to underpin lending activities while maintaining prudence around liquidity cushions.

Edmond Christou, senior industry analyst at Bloomberg Intelligence, provided a perspective on the structural shifts. He noted that local lenders’ financing of large projects necessitates more cash, which supports the issuance of euro-denominated medium-term notes by prominent banks such as Saudi Fransi, Arab National Bank (ANB), Al Rajhi Bank, and Saudi National Bank (SNB). Christou emphasized that the central bank’s policy stance—placing state funds into time deposits—enhanced bank cash flow, supplementing open market operations and substantial debt issuance since 2022. He pointed to $31 billion of debt sales in that period, or $25 billion when SNB’s credit default swaps are excluded, as a significant factor in deepening the liquidity pool. These comments highlight how sovereign and central bank actions have smoothed funding horizons, even as the macro environment shifted in response to tightening liquidity and elevated interest rates.

The analyst’s view framed a broader interpretation: the surge in term deposits is a policy-driven response to tighter liquidity conditions and higher rates, with banks strategically strengthening their balance sheets to navigate sustained credit demand. The November data align with a narrative in which lenders deploy longer-tenor, more stable funding to support the growing appetite for credit among households and corporates, especially in the context of Vision 2030’s expansive infrastructure and development agenda. This section explores the intricacies of deposit dynamics and how they interact with lending patterns, regulatory considerations, and the risk management posture that Saudi banks are adopting.

Deposit Composition and Growth Dynamics

In November, time and savings deposits comprised a sizable and rising share of the money supply, reaching 33.61 percent and totaling 989.99 billion riyals. The year-on-year expansion of these term funds stood at 18.10 percent, underscoring the attractiveness of fixed-term placements in a climate of elevated rates and uncertain macro financing costs. This rapid growth contrasted with the more modest expansion of demand deposits, which rose 7.69 percent year over year and captured nearly half of total money supply as noted earlier. The differential growth rates reveal an intentional shift by financial institutions toward stable, rate-sensitive funding rather than relying solely on more variable, demand-driven inflows.

From a funding perspective, term deposits present predictable cash inflows that align with longer-duration lending, including large-scale infrastructure, project finance, and housing initiatives linked to Vision 2030. Such funding symmetry is particularly valuable when banks face a rising volume of credit applications and need to manage their liquidity risk more proactively. The broader implication is that banks are pursuing a funding mix that buffers seasonal or cyclical fluctuations in deposits, while preserving the ability to extend credit in targeted sectors.

The remainder of the money supply—constituting about 17.63 percent—reflects a diversified array of other monetary components that contribute to overall liquidity. While not as large as the two dominant categories, these components play a crucial role in smoothing liquidity and enabling banks to sustain lending during periods of tighter liquidity or slower deposit growth. Taken together, the deposit mix and its evolution underscore strategic planning by Saudi banks to balance rate risk, funding reliability, and asset growth.

High-level liquidity indicators, including the loan growth trajectory, underscore a nuanced environment. Loans expanded by 13.33 percent year over year in November, outpacing the 10.52 percent rise in deposits over the same period. This lag in deposit growth relative to loan issuance creates a pressure point in liquidity management, pushing banks to seek alternative funding sources or more attractive deposit offerings to maintain a healthy funding base. The gap between loan growth and deposit growth is a familiar feature of an economy undergoing accelerated credit expansion as it prepares for large-scale development projects and elevated demand for capital expenditure.

The broader macroeconomic context frames these dynamics: Saudi Arabia is actively pursuing transformational projects under its Vision 2030 blueprint, emphasizing infrastructure, tourism, and other sectors designed to diversify the economy and reduce reliance on oil. The financing of such ambitious initiatives requires substantial external and internal funding streams, including the issuance of debt instruments, placement of private capital, and an integrated approach to balance sheet management by leading banks. As the fiscal and monetary authorities coordinate policy responses to these pressures, banks increasingly rely on term deposits and other stable funding, even while continuing to serve rising loan demand.

The Role of Public Policy, Central Bank Actions, and Market Conditions

Central bank policy and market conditions exert significant influence on funding costs, liquidity, and the appetite for credit in Saudi Arabia. The Saudi riyal’s peg to the U.S. dollar has historically tied Saudi interest rates to the trajectory of U.S. monetary policy. The period of elevated rates reached a peak that pushed borrowing costs higher across the banking sector, with rates moving up to around 6 percent in certain contexts. As inflation moderated, SAMA began a moderation phase beginning in September, delivering a 50-basis-point cut followed by two additional 25-basis-point reductions. This shift signals a more accommodating monetary stance while preserving stability in the financial system and the currency peg framework.

The higher interest-rate environment, combined with the central bank’s policy shifts, contributed to tighter overall liquidity conditions in late 2022 and into 2023. Although liquidity has since improved relative to the crisis period, the 115-basis-point spread between the Saudi Interbank Offered Rate (Saibor) and the U.S. Secured Overnight Financing Rate (SOFR) remains notable. This spread, which sits above its normalized historical range of around 70 basis points, reflects ongoing frictions in funding costs and the premium that Saudi banks pay to secure funding in a tight liquidity landscape. Christou described the 115-bp Saibor/SOFR spread as an indicator that liquidity remains tight, even as the higher demand for credit continues to outpace deposit inflows.

In response to persistent liquidity challenges, banks have turned to external borrowing channels, including euro-denominated bonds, to bridge funding gaps. Leading lenders such as Al Rajhi Bank, SNB, and Banque Saudi Fransi have leveraged such instruments to support liquidity needs, a strategy facilitated by the broader macro environment and favorable access to international funding markets. While liquidity has not yet returned to crisis-era levels, the current environment marks a cautious improvement relative to 2022, when banks faced acute pressures from surging credit demand and constrained funding. The combination of SAMA’s debt issuance—over $31 billion since 2022—and other supportive measures has eased some loan-to-deposit constraints, though not without ongoing challenges.

At the systemic level, the loan-to-deposit ratio (LDR) offers a key gauge of balance-sheet health. In November, the LDR stood at 82.16 percent, a level that remains well below the regulatory cap of 90 percent. This relative stability arises despite a robust 13.33 percent year-over-year loan growth and a 10.52 percent rise in deposits. The LDR’s resilience is attributed to banks leveraging alternative funding sources, including debt issuance and private placements, which help smooth liquidity and sustain lending capacity. The persistence of a sub-90-percent LDR suggests that the sector can withstand higher credit demand without compromising prudential liquidity.

The International Monetary Fund reinforced a positive, albeit cautious, assessment of the Saudi banking sector in a June report. The IMF highlighted resilience in stress-testing scenarios for banks and non-financial companies, suggesting that the financial system could withstand adverse shocks within certain modeled conditions. Nevertheless, the IMF also underscored the need to monitor the intersection of credit growth, funding diversification, and systemic risk as large-scale government projects accelerate under Vision 2030. In practice, this means continuing to strike a careful balance between lending expansion, funding stability, and risk containment.

Policy implications for SAMA may include calibrating tools that go beyond simple interest-rate adjustments. Potential steps include revisiting loan-to-value (LTV) limits, debt-burden guidelines, and the loan-to-deposit ratio in a way that aligns with evolving credit dynamics and funding structures. In addition, the procurement and deployment of more robust macroprudential instruments—such as a countercyclical capital buffer—could help banks prepare for future shocks and cyclical downturns. To further enhance risk visibility, authorities and banks could implement improved monitoring across several domains, including tracking housing market dynamics and exposures to large-scale projects. A more granular approach to exposure tracking would illuminate potential vulnerabilities and support preemptive risk management.

Section: Financing of Vision 2030 Projects and the Credit Demand Wave

Saudi Arabia’s Vision 2030 blueprint continues to shape the funding landscape, with major infrastructure projects, tourism expansion, and developmental schemes requiring substantial capital. The scale of financing needed for mega initiatives, including developments akin to NEOM and other transformative urban projects, has intensified the demand for credit across the banking sector. The relationship between the government’s investment drive and banks’ funding strategies is central to understanding the current liquidity environment and the outlook for bank profitability and stability.

Banks have responded by optimizing their balance sheets to accommodate the anticipated surge in loan demand. This includes attracting more stable funding through term deposits, leveraging equity and debt instruments, and utilizing international markets to diversify liquidity channels. The strategic emphasis on term deposits indicates a conscious effort to align funding horizons with long-term disbursement patterns for infrastructure and construction activities. Such alignment makes banks more resilient when confronted with project funding cycles, construction-phase expenditures, and the need to maintain liquidity buffers in the face of potential fluctuations in deposit inflows.

At the same time, the elevated Saibor/SOFR spread and the higher general cost of funding suggest that margins in some segments may face compression as banks compete for deposits and seek to maintain profitability. The funding environment’s tightening dynamics, paired with an ongoing need to finance large projects, place emphasis on prudent pricing, risk management, and diversification of funding sources. Banks that successfully navigate these pressures can sustain lending momentum while maintaining robust capital and liquidity metrics.

The IMF’s June assessment, noting resilience but highlighting the importance of monitoring credit growth and systemic exposures, remains a reference point for policy and industry participants. As Vision 2030 accelerates, the risk-reward calculus for banks becomes more nuanced, demanding robust internal controls, rigorous stress testing, and proactive borrower risk assessment. In this context, lenders may need to adapt their underwriting standards and debt-risk frameworks to reflect evolving project profiles, financing structures, and market conditions. The combination of strong capital bases, high liquidity, and efficient risk management will be essential for long-term stability as the sector continues to finance transformative public initiatives.

Loan-to-Deposit Ratios, Risk, and Strategic Adjustments

The persistent 82.16 percent LDR in November sits below the 90 percent regulatory ceiling, suggesting that Saudi banks have some room to absorb additional lending without breaching prudential thresholds. This is particularly relevant given the 13.33 percent year-over-year growth in loans and the 10.52 percent rise in deposits. The relatively safer LDR margin provides an opening for banks to extend credit to strategic sectors within Vision 2030 while maintaining a comfortable liquidity posture. However, the broader risk considerations remain; fast credit growth coupled with expansion in non-deposit funding sources can introduce vulnerabilities, especially if macroeconomic conditions shift or if large projects encounter execution delays or cost overruns.

To mitigate such risks, SAMA and the financial sector may consider employing a suite of policy measures. These measures could include maintaining a stable macroprudential stance, revisiting LDR targets in light of ongoing funding diversification, and strengthening oversight on new credit exposures tied to large infrastructure ventures. Enhanced monitoring frameworks that flag rapid shifts in credit concentration, borrower quality, and sectoral risk exposures would help sustain financial stability as banks navigate a dynamic project financing landscape. In addition, closer tracking of housing price movements and the concentration of exposures to large, high-value projects could provide a clearer picture of systemic risk, enabling timely responses.

The balance between debt issuance and private placements—used to support liquidity—appears to be helping banks manage liquidity pressures. Since 2022, SAMA’s debt issuance has totaled over $31 billion, augmenting the sector’s funding toolkit and easing some strain on deposit-driven liquidity. This support, in combination with ongoing open market operations and central bank facilities, has contributed to a more favorable funding environment than in the 2022 liquidity crisis. While this improvement is meaningful, it does not eliminate the need for vigilant risk management and ongoing policy refinement to ensure the banking system remains resilient amid continued credit growth.

Prudential Tools and Monitoring for Long-Term Stability

The current landscape—characterized by strong loan growth, stable but rising term deposits, a high share of demand deposits, and a still-tight liquidity regime—calls for a careful, multi-faceted approach to risk management and policy design. Enhanced tools, such as a countercyclical capital buffer, could help preempt systemic risks by requiring banks to build extra capital buffers during periods of rapid credit expansion. In practice, this would support resilience by enabling lenders to absorb potential losses and continue lending during downturns.

Another important area is improved monitoring of home prices and the concentration of exposures to large-scale projects. Systematic traceability of bank exposures to government-driven initiatives would illuminate vulnerabilities and inform supervisory actions. The IMF’s assessment underscores that, while resilience exists, the sector must be prepared for evolving risk dynamics as Vision 2030 deepens and funding requirements grow. Supervisory authorities and banks should therefore maintain rigorous stress-testing regimes, scenario analyses, and capital planning that reflect the evolving mix of funding sources, credit demand, and macroeconomic conditions.

In summation, the Saudi banking sector appears to be navigating a complex liquidity and credit environment with a mix of supportive policy, strategic funding moves, and disciplined risk management. While term deposits have surged and become a more stable funding pillar, the acceleration of loan growth and the high Saibor/SOFR spread illustrate the trade-offs inherent in maintaining liquidity while financing ambitious development plans. The path forward will likely involve a combination of continued macroprudential vigilance, prudent balance-sheet management, and ongoing policy calibration to sustain credit momentum without compromising financial stability.

Conclusion

Saudi banks’ November liquidity and lending dynamics reveal a carefully balanced system responding to elevated rates, central bank actions, and a government-led investment drive. The money supply reached 2.95 trillion riyals, with time and savings deposits climbing sharply and contributing a larger share of funding, supported by a broad-based increase in deposits and a robust loan expansion. The data highlight how term deposits are becoming a more stable funding pillar as banks seek to align their capital structures with growing credit needs, particularly in infrastructure and development projects tied to Vision 2030.

Key factors shaping the current environment include significant central bank activities, including open market operations and substantial debt issuance, which have supported bank liquidity while the Saibor remains elevated relative to SOFR. The ongoing tension between loan growth outpacing deposit growth underscores the importance of diversification in funding sources, including external borrowing and euro-denominated notes, as banks manage liquidity and funding costs. The loan-to-deposit ratio staying under the regulatory limit provides some confidence about systemic stability, but the sector must remain vigilant as credit expansion accelerates and large-scale projects continue to unfold.

Looking ahead, the future trajectory will hinge on how policymakers balance credit growth with funding stability. The IMF’s June assessment, alongside ongoing market developments, points to a resilient banking sector but one that requires continued attention to risk management, financial monitoring, and macroprudential policy. Potential policy measures, such as refining loan-to-value limits, tightening debt-burden guidelines, and deploying countercyclical buffers, could help prepare the system for future shocks while supporting the sustained financing of Vision 2030 initiatives. Banks’ ability to maintain profitability and liquidity in a shifting funding landscape will depend on prudent pricing, diversified funding strategies, and rigorous oversight of exposures to large-scale projects, combined with disciplined management of housing and other consumer credit risks. In this context, the Saudi financial system appears well-positioned to support a high-growth trajectory while preserving resilience and financial stability for the longer term.