Banking

The Bank That Built Saudi Home Finance Is Now Growing by Letting Loans Go

Al Rajhi Bank's profits are still rising at double digits. Its balance sheet has almost stopped moving. The gap between those two facts says more about the next chapter of Saudi banking than the headline number does.

Ameer Albahouth

14 Oct 2026 • 6 min read

Two numbers that no longer move together

In the first half of 2026, Al Rajhi Bank earned SAR 13.76 billion, about 14% more than a year earlier, according to its filing on the Saudi Exchange. That is the headline, and it is the kind of number that usually ends the conversation. A bank of this size growing profit at that pace looks like a bank simply doing more of what it has always done.

The balance sheet tells a different story. Over the same twelve months, total assets rose 1.8% to SAR 1.05 trillion, and the financing portfolio grew 2.75%. Management has guided loan growth for the year down to low single digits, according to a summary of its second-quarter earnings call.

Profit, in other words, is growing about five times faster than the loan book. For a bank whose financing grew 19% year on year as recently as the first quarter of 2025, that is not a footnote. It is a change of character.

From exchange house to the bank of the household

Al Rajhi's own timeline begins with a business that moved money rather than kept it. The bank dates its founding to 1957, when it was established as an exchange house, and it became a licensed bank under a royal decree in 1987. For most of the decades since, its growth has come from individuals: salaries, personal finance, and above all, homes.

The depth of that relationship is visible in the bank's own reporting. In its 2025 annual report, Al Rajhi says it holds 37.7% of the Kingdom's real estate financing market and 37.8% of retail financing. It reports about 22 million customers. The General Authority for Statistics put the Kingdom's population at 35.3 million in mid-2024. The two figures are not strictly comparable, but together they suggest a customer count equal to roughly six in ten people living in the country.

That scale is the bank's great asset. It is also its constraint. When an institution already finances more than a third of the country's home loans, the strategic question changes. It is no longer how to reach more households. It is what to do once you have reached most of them.

The decision to hand loans on

The clearest answer so far arrived in November 2025. Al Rajhi completed agreements with the Saudi Real Estate Refinance Company (SRC), a PIF company, covering two mortgage portfolios worth SAR 10 billion. Majed Saleh Al-Rajhi, the bank's general manager of retail banking, presented the transactions as the launch of an "Originate-to-Distribute model."

The idea is simple, even if the mechanics are not. The bank still finds the customer, approves the financing, and owns the relationship. It then sells part of what it originated to a state-backed buyer, recovers capital, and lends again. The loan leaves the balance sheet. The customer does not leave the bank.

This was not the first sale. In 2023, SRC bought a portfolio of more than SAR 5 billion from Al Rajhi, a deal both sides described at the time as the largest of its kind in Saudi banking. What changed in 2025 was the framing. A transaction became a model.

The shift shows up in the bank's numbers. In the first half of 2025, Al Rajhi reported its mortgage book growing 15% year on year. By the end of that year, the bank's chief executive reported that the real estate financing portfolio had grown 3% for the full year. Gains from securitizing retail assets lifted other operating income by 48% in 2025, according to The Asian Banker. Management has since linked its lower loan growth guidance partly to securitization and to a stated preference for value over volume.

Where the new growth is coming from

If the home loan is no longer the main engine, something else has to be. The filings point to businesses, and especially smaller ones.

The bank's SME book grew 46.7% year on year in the second quarter of 2026, according to FAB Securities. SMEs made up about 8% of total financing at the end of 2025 and roughly a quarter of the non-retail book by mid-2026. The wider corporate portfolio grew 24% in 2025 to SAR 271 billion, which the bank says gave it a 14.5% share of corporate lending. Investment banking revenue, run through Al Rajhi Capital, has risen about 270% since 2023, by the bank's account.

Fees matter too. The bank's chief financial officer, Abdulrahman Al-Fadda, reported that non-yield income made up about 24% of operating income in 2025, and that it exceeded the bank's total operating expenses for the year. For a lender long defined by the spread on household financing, that is a quiet but meaningful milestone.

These are decisions made by people, across two strategy cycles. Waleed Al-Mogbel has led the bank as chief executive through its "Bank of the Future" plan, which ended in 2023, and its current "harmonize the group" strategy, which concludes this year. A new three-year strategy is expected to be approved by December 2026 and presented to investors next year, according to FAB Securities. [INSERT: any on-record comment from Al Rajhi Bank leadership on the direction of the next strategy, from the bank's communications team]

The discipline the new engine demands

A bank built on households that turns toward businesses is learning a different discipline. Home financing to salaried customers is among the more predictable forms of lending a bank can do. Lending to small and mid-sized companies is not. Their cash flows are thinner, their histories shorter, and their fortunes more tied to a single contract or a single season.

There are early signs that the new mix carries a different cost. In the second quarter of 2026, impairment charges for expected credit losses rose 46.8% to SAR 881 million. The bank attributed the rise to a 36% increase in total additions, alongside higher recoveries from previously written-off financing. One quarter does not make a trend. It does, however, mark the point where the question shifts from how fast the new engine can grow to how well its risks are priced.

The bank itself has been measured about the environment. Al-Fadda told The Asian Banker earlier this year that he expected credit demand in 2026 to be "slower compared to historical levels." That is an unusual sentence from a bank still reporting double-digit profit growth, and it may be the most honest description of where the growth is now coming from.

What the rest of the system gains

The shift matters beyond one institution. SRC exists to build a secondary mortgage market, and the Kingdom has set a goal of expanding mortgage finance to SAR 1.3 trillion by 2030, according to Zawya. If the country's largest home financier increasingly originates and then distributes, the system's capacity to fund homes depends less on any single bank's balance sheet.

That is a structural change, not a dramatic one. Private-sector financing across the Saudi banking sector grew 10.4% in 2025, according to Al Rajhi's annual report, so the bank is not slowing because the economy stopped borrowing. It is choosing where to hold risk and where to pass it on. [INSERT: Q3 2026 results, expected later in October, if published before this article runs]

The business of moving money

Al Rajhi began as an exchange house, a business whose job was to move money between people rather than to accumulate it. Seven decades and a trillion riyals later, its most interesting growth decision looks less like accumulation and more like circulation.

The open question is whether the borrowers it is now pursuing, the small companies and corporates, will prove as dependable as the households that made it. Its customers once came to it to change currency. The bank is now trying to change what it is for them.

Sources

Calculation note: "About five times faster" is Arabian Growth's calculation from the H1 2026 net profit growth (14.2%) and financing portfolio growth (2.75%) reported in the bank's filing. "Roughly six in ten" compares the bank's reported customer count (about 22 million, mid-2026) with GASTAT's mid-2024 population estimate (35.3 million). The periods differ and a customer count may include accounts that do not map one-to-one to residents, so the ratio is indicative only. Market-share, customer, corporate-share, and investment-banking figures are reported by the bank and have not been independently verified.

[INSERT: Editor's disclosure, if required. Confirm whether Arbaaa, Arabian Growth, or their founders have any current or pending commercial relationship with Al Rajhi Bank or with Al Rajhi family companies. Editor-only placeholder; remove before publishing.]