Saudi banks: Add more OWs in T2s

Research evidence excerpt

Saudi banks: Add more OWs in T2s

Konstantin Rozantsev AC CEEMEA Credit Research

(44-20) 7742-0275 30 June 2026 J P M O R G A N

konstantin.rozantsev@jpmorgan.com

Limited fundamental risks. The recent conflict, through the impact on non-oil growth,

could affect banks’ loan performance, but we expect this impact to be contained and the sector

to remain profitable. During the pandemic period, which was a larger shock, Saudi banks’

CoR peaked around 100-150bp in select quarters and RoEs bottomed around 10%. See here

for our recent update on the sector.

IMF stress tested bank capital in Saudi in 2024 (see here). In an adverse scenario, which

assumed a 2-year cumulative drop in non-oil GDP of 3.5%, followed by a steady recovery,

the Fund estimated the sector’s CAR to drop and bottom 2pp lower versus its base level. We

think that this test showed banks’ resilience. JPM expects non-oil growth in Saudi to remain

positive this year. There are no signs of deposit instability, with deposits up and deposit

growth usually outpacing lending growth at most banks during 1q26.

Risks. Changes in oil prices, regional developments and changes in the market perception of

the extension risk present risks to our recommendations

Figure 1: Saudi banks’ subs: 1. T2s trade close to perps on spreads, 2. Figure 2: Perps of larger GCC banks

Conventional bonds trade at spreads over sukuks

270 300

z spread to call, bp Alinma 30P Snbab 31P z spread to call, bp Ntbkkk 31P Snbab 31P

250 30P 250 Bsfr 30-35 Bsfr Kfhkk 30P Rjhiab 31P Ribl 31-36 Albiab 30P Rjhiab 30P

Arnbab 30P 230 Sabbab 30P Albiab 31P 200 Adcbuh 28P Rjhiab 29P Ebiuh 31P Alinma 30P

Fabuh 31P Rjhiab 31P Rjhiab 30P 210 Rjhiab 31-36 Ribl 29P Ebiuh 30P Ribl 30-35 150 Alinma 30-35 Alinma 29P

190 Rjhiab 29P Sabbab 30-35 Rjhiab 31-36

Snbab 30-35