Saudi National Bank Surges to Record Net Income in Q4 2024: A Strategic Triumph Amid Rising Risks

The Saudi National Bank (SAU:1180) delivered a stellar performance in Q4 2024, reporting a 5.9% year-on-year rise in net profit to SAR 21.2 billion (USD 5.7 billion), fueled by robust growth in core revenue streams and strategic portfolio expansion. This marked the bank’s highest quarterly net income in recent history, underscoring its resilience in a challenging economic environment.

Key Drivers of Growth

1. Special Commission Income Surge:
   The bank’s special commission income jumped 16.0% year-to-date, reaching SAR 15.0 billion, driven by an 8.8% expansion in its financing portfolio and 8.7% growth in investments. Retail mortgages surged 12.2%, while wholesale financing rose 10.4%, reflecting strong demand across both consumer and corporate sectors. Notably, international operations outperformed domestic markets, with special commission income increasing 34.3% globally—highlighting SNB’s geographic diversification strategy.

2. Fee-Based Revenue Boom:
   Net fees from banking services soared 17.2% year-to-date, with Q3 2024 alone showing a 19.6% surge compared to the prior-year period. This growth aligns with the bank’s focus on digital transformation, including AI-driven personalized services and blockchain-based cross-border transactions—a direct response to Saudi Arabia’s Vision 2030 modernization goals.

3. Asset Expansion:
   Total assets grew 6.5% year-on-year to SAR 1.4 trillion, supported by 7.5% higher customer deposits. The financing and investments portfolios collectively expanded 8.7-8.8%, signaling strong client confidence and SNB’s ability to capitalize on liquidity in the Saudi market.

Challenges and Risks

Despite the record profits, SNB faced headwinds:
- Credit Provisions Rose Sharply: Net impairment charges for expected credit losses jumped 10.9% year-to-date, with Q3 2024 charges spiking 395% versus the prior year. This reflects heightened caution in an economy facing global interest rate volatility.
- Operating Margin Pressure: While revenue grew, operating expenses increased 4.3% year-to-date, squeezing margins. Management attributed this to tech investments and compliance costs.

Strategic Positioning and Future Outlook

SNB’s leadership emphasized alignment with Saudi Arabia’s Vision 2030, particularly in digital banking and financial inclusion. The bank’s blockchain-powered remittance platform and AI-driven customer service tools now serve over 5 million users—a 20% rise from 2023. This tech push not only drives fees but also positions SNB as a regional leader in fintech adoption.

Investment Implications

• Valuation: With a P/B ratio of 1.2x—below its five-year average of 1.4x—SNB’s stock appears undervalued, offering a potential buying opportunity.
• Catalysts: The bank’s dividend yield of 4.5% and 2024-2025 capex plans targeting digital infrastructure could further boost investor confidence.
• Risks: Rising credit risks and geopolitical uncertainties in the Middle East remain key concerns.

Conclusion

Saudi National Bank’s Q4 2024 results demonstrate its ability to navigate macroeconomic headwinds while capitalizing on structural growth drivers in Saudi Arabia’s financial sector. With 16% YoY growth in special commissions, 12.2% retail mortgage expansion, and 34.3% international revenue gains, SNB is on track to sustain its leadership position. However, investors must monitor credit quality closely, as provisions rose 10.9% YoY—a red flag in an uncertain global economy.

For long-term investors, SNB’s 4.5% dividend yield, tech-driven fee growth, and alignment with Vision 2030 make it a compelling play on Saudi Arabia’s financial modernization. Short-term traders, however, may want to wait for clearer signals on credit risk resolution before taking positions.

In short, SNB’s Q4 performance is a strategic win, but its future hinges on balancing growth with prudent risk management—a tightrope walk that will define its success in 2025 and beyond.