(MENAFN - Arab News) Banking loans are predicted to grow in Saudi market by more than 10 percent in the current year due to growth of deposits at steady rates, according to financial experts.
Financial expert Walid Al-Subaei said growth of loans rested on continuity of the Kingdom as one of key drivers of banking sector growth on predictions that the Kingdom's gross domestic product (GDP) will grow by 6.8 percent in 2012.
The expert enumerated a number of factors that will positively affect performance of banks including higher growth rates for deposits versus loans, cutback of operation expenses, and increase of income for banks.
Profits of Saudi banks stood at SR25.6 billion in 2011, an increase of 16 percent compared to last year's profits, whereas earning per share (EPS) for banking and financial services sector averaged at SR2.78 at the end of last year, he said.
Increasing volume of financing assets to meet the growing demand on funding poses a big challenge to Saudi banks, he said.
He said higher rates of inflation remains an issue of concern for Saudi economy in the presence of huge liquidity looking for investment opportunities as Saudi banks, meanwhile, are facing a challenge on how to achieve the required growth amid an economy depending on a single commodity as the main source of income.
Financing expert Mansour Al-Sulaiman predicted an uptrend surge in the volume of finance and loans in local market in Q2 2012 ranging between 10-15 percent due to desire of many people to enter the stock market after its recent recovery by 21.2 percent in Q1 2012, remaining the best regional market.
Growing government spending and positive demographic structure are key factors to boost demand on loans, he said.
Saudi banks are expected to increase financing operations during the current year amid expected issuance of mortgage system, particularly following the announcement of Real Estate Fund over its plans to enter with banks in financing citizens to build housing units, the expert said.