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A recent analytical study by researchers Baher Abdel Aziz and Hatem Ramadan examined the evolution of the banking sector in Egypt and Saudi Arabia between 2008 and 2024, highlighting strategic transformations amid rising global economic pressures and increasing interest rates. Published in the International Journal of Innovative Research and Scientific Studies, the research revealed distinct growth trajectories between the two countries, reflecting differences in banking models: profit maximization versus financial stability.

Egyptian banks achieved significant improvements in operational efficiency and profitability, supported by a substantial enhancement in their capital bases, with the average Capital Adequacy Ratio (CAR) reaching 22% by 2024. This translated into higher returns through reduced risk-weighted assets (RWA) and improved Return on Assets (ROA), despite global economic fluctuations.

Conversely, Saudi banks maintained high and stable capital adequacy levels, enabling them to withstand economic shocks without materially affecting profitability, reflecting strong regulatory frameworks and conservative risk management.

Asset Quality and Credit Risk:
Egypt saw a historic improvement in asset quality, with non-performing loans (NPLs) declining from 20% in 2008 to 3.7% in 2024, significantly reducing credit risk. Saudi banks continued to maintain very low NPL levels, reinforcing financial stability.

Bank Size and Inflation:
The study noted a 17% average growth in bank size, though inflationary pressures reduced real purchasing power, necessitating accelerated asset growth. In Egypt, larger state-owned banks showed relatively higher default rates, while in Saudi Arabia, bank size supported service expansion without directly affecting profitability.

Loans-to-Deposits Ratio (LDR) and Profit-Risk Balance:
Higher LDR correlated with increased returns but also heightened credit risk. Egyptian banks adopted a more conservative liquidity management approach, while Saudi banks expanded lending, reflecting different risk-return outcomes.

Operational Efficiency and Profitability:
Egyptian banks reduced Operating Expense Ratio (OER) from 48% to 25%, boosting ROA and Return on Equity (ROE). Saudi banks improved OER to 35%, yet Egyptian banks retained an efficiency advantage, reflecting superior profitability under market pressures.

Interest Rates and Bank Profitability:
Interbank interest rates (INTERB) directly affected bank profitability, as higher rates encouraged cautious lending policies, positively impacting ROA while maintaining moderate risk levels.

Profitability Indicators:
Egyptian banks’ ROE rose from 17% to 30%, and net interest margin (NIM) increased from 3.4% to 9.8%, compared to Saudi ROE capped at 15% and NIM at 3–4%, highlighting structural and monetary policy differences.

Conclusion:
The study concludes that Egyptian banks have enhanced returns and operational efficiency amid rising global interest rates, while Saudi banks prioritize financial stability and regulatory discipline. These insights provide valuable guidance for investors and policymakers assessing opportunities and risks in both banking markets.