Saudi Awwal Bank -SAB- Posts 10% Rise in Q2 Profit as Lower Credit Provisions Offset Rate Pressure

Riyadh | EcoPulse24

Saudi Awwal Bank (SAB) reported a 9.6% year-on-year increase in second-quarter net profit to SAR 2.331 billion, as significantly lower expected credit loss provisions and continued expansion of its lending portfolio more than offset pressure from declining interest rates and weaker non-funding income.

The bank's net profit attributable to shareholders also increased 11.7% from the previous quarter, reflecting stronger profitability across its core banking operations despite a softer revenue environment.

First-Half Profit Climbs to SAR 4.42 Billion

For the six months ended June 30, 2026, SAB generated net profit attributable to shareholders of SAR 4.417 billion, up 3.6% from SAR 4.262 billion in the corresponding period of 2025.

Profit before Zakat and income tax reached SAR 4.961 billion, while total operating income stood at SAR 7.275 billion during the first half of the year.

Loan and Deposit Growth Continues

The bank continued to expand its balance sheet during the first half of 2026.

Gross loans and advances increased 13.3% year-on-year to SAR 320.2 billion, while customer deposits rose 15.2% to SAR 342.2 billion.

Total assets climbed 9.4% to SAR 474.5 billion, while shareholders' equity increased 6.9% to SAR 80.9 billion.

Investment holdings declined 8.4% year-on-year to SAR 99.8 billion, reflecting changes in the investment portfolio.

Credit Loss Provisions Fell Sharply

One of the strongest contributors to quarterly earnings was the substantial reduction in expected credit loss (ECL) provisions.

Net ECL charges dropped to just SAR 5 million during the second quarter from SAR 216 million a year earlier, representing a decline of nearly 98%.

SAB said the decrease primarily reflected lower provisions on loans and advances together with reversals of provisions related to off-balance-sheet exposures.

For the first half, total expected credit loss provisions fell 52% to SAR 172 million, supported by higher recoveries of previously written-off loans and reduced provisioning requirements.

Higher Lending Offsets Lower Interest Rates

SAB said net special commission income continued to benefit from growth in its lending portfolio and interbank lending activities.

However, declining interest rates reduced average asset yields, particularly on floating-rate loans.

Funding costs also increased as the bank experienced higher time deposits and greater issuance of debt securities and longer-term borrowings.

During the first half, gross special commission income from financing reached SAR 8.874 billion, while net special commission income from financing totaled SAR 5.406 billion.

Non-Funding Income Remained Under Pressure

The bank reported weaker performance across several non-funding revenue lines.

Foreign exchange income declined due to lower trading volumes, while fee and commission income and other operating income also softened. SAB additionally recorded a lower contribution from its associate company as activity in capital markets and securities trading weakened.

Operating expenses increased modestly, mainly because of higher depreciation and amortization expenses following increased capitalization of software investments, reflecting SAB's continued investment in digital capabilities. Staff-related expenses also edged higher during the first half.

Earnings Per Share

Earnings per share for the first half of 2026 stood at SAR 1.96, compared with SAR 1.95 in the same period last year.

The bank also confirmed that its external auditor issued an unmodified opinion, with no qualifications or emphasis of matter.

EcoPulse24 Analysis

SAB's second-quarter results demonstrate that balance-sheet expansion and improving asset quality continue to support profitability despite a less favorable interest-rate environment.

The sharp decline in expected credit loss provisions was the primary earnings driver, while sustained growth in loans and customer deposits highlights continued demand for financing. At the same time, lower foreign exchange income and softer fee generation indicate that non-funding revenue remains under pressure as market activity moderates.

Looking ahead, investors will likely focus on whether continued loan growth can offset further compression in lending margins should interest rates remain on a downward trajectory.

Key Financial Highlights