Saudi banks are expected to continue growing their lending activity in 2012, encouraged by the government’s massive spending programmes, with loans to the higher-margin retail and real estate sectors likely to enhance profits.

High capital ratios and strong liquidity positions will allow Saudi banks to grow their loan books by 13.5% this year, said Farouk Miah, an equity research analyst at Riyadh-based NCB Capital. This compares with estimated loan growth of just over 11% in 2011.