Arab National Bank, one of Saudi Arabia's major lenders, reported a net profit of SAR 1.351 billion for the third quarter, according to a statement to Reuters. The bank also disclosed that its loans and advances reached SAR 209.17 billion by the end of September, while customer deposits stood at SAR 217.53 billion.
The results reflect a banking environment in the Kingdom that remains active, with lending demand supporting revenue. However, the figures also highlight a growing squeeze on the bank's funding cushion, a trend that investors will want to watch closely.
What drove the profit?
The bank said operating income came in at SAR 2.554 billion for the quarter, helped by growth in net loans and advances and a larger investment portfolio. A key driver was higher "net special commission income" — the banking term for the difference between what a bank earns on loans and what it pays on deposits and other funding. This is essentially the core engine of a bank's profitability.
The bank also pointed to stronger foreign-exchange and trading income, which added to the top line. But not everything moved in the same direction. Fees and commissions, as well as dividend income, declined during the quarter. That mix suggests part of the strength came from market-related activity rather than steady, recurring banking services.
On the cost side, the bank flagged lower depreciation and premises-related expenses, which helped keep more of that revenue as profit. Lower costs can be a one-time benefit, so investors may want to see if that trend continues in coming quarters.
Why the loan-to-deposit ratio matters
One of the most telling numbers in the update is the relationship between loans and deposits. With SAR 209.17 billion in loans and SAR 217.53 billion in deposits, the bank's loan-to-deposit ratio sits near 96%. That means for every SAR 100 in customer deposits, the bank has lent out about SAR 96.
That is a high level. When a bank's loan book is nearly fully funded by deposits, it has less room to grow lending without either slowing down or turning to more expensive sources of funding, such as interbank borrowing or issuing bonds. These wholesale funding sources typically cost more than customer deposits, which can eat into the net special commission income that is so important to profitability.
In other words, even if loan demand stays healthy, the bank's margins could come under pressure if it has to rely more on pricier funding. This is a common challenge for banks that grow their loan books faster than their deposit bases.
What it means for investors
For everyday investors, the key takeaway is that Arab National Bank delivered a solid quarter, but the sustainability of that performance depends on how it manages its funding mix. A high loan-to-deposit ratio is not a red flag by itself, but it does signal that the bank may need to be more careful about how it finances future growth.
Investors should also note that the profit was partly boosted by trading and foreign-exchange income, which can be volatile. If market conditions turn, that source of revenue could fade, leaving the bank more reliant on its core lending business.
The bank's results come at a time when other regional lenders are also reporting. For example, Emirates NBD's Q3 profit was flat as costs outpaced revenue growth, showing that even strong economies don't guarantee smooth earnings for banks. Similarly, Bajaj Finance saw its shares slip on regulatory worries despite a big profit jump, highlighting how external factors can weigh on financial stocks.
Looking ahead, investors will likely watch whether Arab National Bank can grow its deposit base faster than its loans, and whether its net special commission income remains resilient. The bank's ability to keep costs in check will also be a factor, as will the overall health of the Saudi economy and interest rate environment.
For those who hold the stock, the key question is not just whether profit rose this quarter, but whether the bank can sustain that growth without taking on more expensive funding. For those considering an investment, the loan-to-deposit ratio is a useful metric to track in future earnings reports.
As always, it's important to remember that past performance is not a guarantee of future results. Banks operate in a cyclical industry, and their earnings can be affected by interest rates, regulation, and broader economic conditions.
