Banks maintain strong profit margins despite rising deposit costs: analyst
Saudi financial analyst Saud Al-Mutair says banks are sustaining robust profit margins, even as deposit costs increase, due to the gap between lending returns and funding expenses.
Key Takeaways
AIFinancial markets analyst Saud Al-Mutair said that banks are maintaining strong profit margins despite the rising cost of deposits.
Speaking to Al Ekhbariya TV, Al-Mutair explained that this is due to the difference between lending returns and funding costs.
He added that the announcement of banks’ results is an important catalyst for the market, but the reaction has been weaker than expected, and market performance remains subdued. Some banks have posted strong results and are on track to achieve record profits.
Al-Mutair noted that banks’ profits provide a significant boost to the market. While deposits previously yielded zero returns, they now generate income, which increases costs for banks and reduces returns on deposits.
He continued that the rising rate of deposits will encourage banks to increase lending, giving them a strong push for growth and expansion.
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