Welcome everyone to the Riyad Bank 1Q 2026 earnings call. My name is Adam. I'll be your coordinator today. I will now hand over to Muhammad Faisal Potrik from Riyad Capital to begin.
Thank you, operator. Riyad Capital is pleased to host the management team for Riyad Bank's first quarter 2026 earnings call. At this point, I'd like to hand over the call to Mr. Rayan Al-Shuaibi, Head of Investor Relations. Please go ahead, Rayan.
Thank you, Potrik. Good day, everyone, and thank you for joining us to this call. With us today, our CEO, Nadir Al-Koraya, and CFO, Abdullah Ali Al-Oraini. As always, CEO will start with the performance highlight and strategy update. Followed by the CFO to cover the financial performance in more detail. After that, we'll open the floor for your questions. Before we start, a quick reminder that today's presentation is available on our IR page as well as the IR mobile app. With that, I'll hand it over to the CEO to start the presentation.
Thank you, Rayan. Good afternoon, everyone. Thank you for joining us today. It's been a strong start to 2026. I'm really pleased to walk you through the key highlights. Overall, we are seeing this continued execution against our strategy and reinforcing the resilience of our core franchise. Before I get into the numbers, let me briefly touch on the geopolitical environment. As you would expect, we are closely monitoring developments. The environment is dynamic, our focus has not changed, maintaining resilience, protecting our operations, and continuing to support our clients. We've got strong risk framework in place and well-tested contingency planning. We feel well prepared. At a broader level, yes, geopolitical risks can create short-term volatility. At the same time, the Kingdom fundamentals remain very strong, supported by fiscal strength, stable banking system, and proactive policy.
Against this backdrop, we remain confident in our positioning. Our balance sheet is strong, our risk approach is disciplined, and our business model is well diversified. That gives us the flexibility to navigate uncertainty while still supporting growth. We are not seeing any material deterioration. Asset quality remains solid, customer behavior is stable, liquidity strong. We continue to operate with a very disciplined approach to underwriting and monitoring. We are also staying forward-looking. We are running stress scenarios, maintaining strong provisioning discipline, and staying close to our clients. Overall, we feel we are well-positioned to re-respond to changes while preserving balance sheet strength and earning visibility. With that context, let me now turn to our performance for the quarter. Starting with the balance sheet. We delivered solid growth with total assets reaching SAR 537 billion, up 3% year-to-date.
What's important here is the quality of that growth. We've deliberately shifted our asset mix toward higher quality, more capital-efficient opportunities. Within that, investment portfolio grew strongly, up 9%. Loan growth was more moderate at around 1%, this is intentional. We are focusing on returns and discipline, not just volume. On the funding side, liability grew 3%. Deposits were particularly strong, up 6%. Here, what's important that the deposit actually grew faster than loan, which is helping to improve liquidity, reduce funding pressure, and support margin resilience. Moving to profitability, we continue to build sustainable earnings through discipline, stronger client relationships, and efficiency. Operating income is up 2% year-on-year, driven mainly by net interest income growth. At the same time, efficiency continues to improve.
Cost to income ratio improved to 29.7%. That's really a reflection on of ongoing optimization across the bank. As a result, net income reached SAR 2.6 billion, up 5%. Return on equity remains strong, around 16%. Overall, good quality, consistent earnings performance. On financial strength, we remain in a very solid position across all key metrics. Asset quality is strong, NPL ratio improving, coverage remain robust. Capital is also strong. Capital adequacy ratio at 19.3%. Liquidity remains healthy. All ratios are comfortably within regulatory thresholds. This reflects disciplined execution and prudent risk management. New slide, please. Let me now step back and touch briefly on strategy. As you know, we've been progressing our 2030 strategy. Execution is already underway. The environment is evolving.
Economic volatility, digital transformation, changed customer expectations. Our strategy is designed to respond directly to that. At a high level, we are focused on scaling retail, strengthening wholesale, embedding AI and data, and modernizing our technology platform. Our ambition is clear: to become the most innovative bank in the Kingdom while delivering sustainable growth. Everything we do is anchored around five pillars. First, shareholder value, driving consistent, sustainable performance and strong returns. Second, customer and employees, because great people deliver great customer experience, and that drives growth. Third, digital first. We're not just digitizing, we're rethinking banking through AI and seamless experiences. Fourth, building for the future by expanding our customer base, especially in retail and MSME. Fifth, trust and sustainability to ensure that we remain stable, responsible, and dependable bank. Together, these pillars give us a clear and balanced framework for execution.
Overall, we've had a strong start to the year. We remain well-positioned, and we are continuing to execute with discipline and consistency. With that, let me now hand over to my colleague, Abdullah, our CFO, who will take you through the financials in more details. Abdullah?
Thank you, Nadir. The growth in profitability, as you can see in page six and Nadir has already alluded to, was largely driven by the growth in the operating income, which came around 2.5% year-on-year compared to the similar quarter last year. Equally important also, the improved efficiencies through a very controlled cost discipline, where the total operating expenses on a comparable period declined by 0.5%. That's, I think, the key drivers behind the Q1 in terms of profitability. The balance sheet expansion and the footing was driven by investments, as highlighted by Nadir. I think this is very important that we focus.
We had selectively and opportunistically increased our investments portfolio, notwithstanding the opportunities that came through the most recent period. These were largely funded by customer deposits as well as the debt securities that we had continued to diversify the funding sources. That is also being supported by increased level of retail collections and recovery and partially less corporate collections, which has helped the cost-to-income ratio as well as the cost of risk in more specific to reach to 45 basis points compared to 40 basis points compared to Q1 2025.
Efficiency at one of the best quarters that we have registered to 29.7%, while the net income expansion was driven largely by the net special commission income growth, which was supported by the incremental assets growth that we have witnessed, as well as the preloaded growth that we have done in 2025. This comes all together with a strong liquidity and capital positions, as highlighted by my colleague, Nadir. In the following slide, just to shed more lights on the key assets movement part. As you can see here, the investments almost equivalent to the double of the loan portfolio, which has been cautiously and by design has grown in the past 3 months, and we will continue to look at the market opportunities.
The cash and balances with SAMA has grown significantly by SAR 19 billion. This is on the back of the significant transitory deposits that we witnessed the last two days of the quarter. These transitory deposits have been deployed into the liquid assets, which is basically, in that case, a reverse repo with SAMA. That explains the jump in SAMA and cash balances. The loan mix largely stayed the same. Now we are almost 74% corporate versus 26% of retail. The sectors largely remained stable compared to the year-end position. On page eight or slide number eight, the continuing of our focus on the on sources of fund diversifications is still intact.
Customer deposits by all types are a key priorities for us, as well as to selectively and continually manage the cost of funds of the bank without jeopardizing the overall funding profile. The NIBs as a total to total deposits have enhanced to almost 51%, but that also has an impact of the transitory accounts. Majority of which of the SAR 22 billion in NIBs, as you can see in the left bottom corner chart, significant portion of that was in the form of transitory accounts that I have mentioned. The headline LDR decreased to 107%, while the NSFR has increased by 4 percentage point on a year-to-date basis.
On page nine, as I explained, the net special commission income, the modest increase that we have registered, probably by volume growth and also partially offset by the cost of funding. I think it's very important here to highlight that the impact of the SIBOR decreases based on the benchmark rates movement that happened during 2025 as well as during the first quarter of 2026. That has impacted also our assets yield, which we have been always managing with actively to counter that with an active repricing to our corporate customers. We have done a very good progress over the last 6 to 7 months, and we will continue to do so.
The cost of fund increases of 12% mainly is due to the impact of the fully loaded debt that we have issued post Q1 2025. The 355 explains that. I think the key message here and the most important thing is we have seen margin stabilizations overall. The quarter has marginally dipped by 3 basis points, but we continue to work very closely with the businesses as well as with our customers to defend that and potentially have some sort of positive upside. On page number 10, I think the expanding of product offering with cross-sell activities. It was a strategic priority over the last 2 years, but now it's business as usual for us.
That continued to focus on generating value for the bank through offering several products and cross-sell across the RB Bank as well as the group as a whole. The lower fees that we registered on the Q1 versus Q1 last year was largely driven by first, I think, the volume that we had done in the loan in terms of the credit facilities fees was very marginal. I think that explains the credit facilities and advisories fees. I think more importantly, I think the pro-products here have been impacted by the, you know, geopolitical situations. One is that the amount of spend, the cross-border spend has declined significantly compared to the similar period last year.
Plus also the impact of the introduced SAMA ta riff regulations that were done in 2025. This is a fully loaded in terms of the new tariff that was issued by the Saudi Central Bank. We have been also seeing some marginal decrease on our brokerage business. Assets under management business are largely stable. I think that explains the decline on the banking services. These were more than offsetted by an increased customer flow treasury product solutions that we have offered to our customers and that explains the overall growth on the fee and other income by 1%. I think the level of SAR 1.2 billion continue to be resilient.
I think this is an area of focus that will continue with us for the foreseeable future. On page number 11, I did highlight that the efficiencies as well as the total operating income growth has helped us to maintain our positive jaws, which is registered 3% for Q1 2026. That discipline will continue in 2026 as we are targeting cost-income ratio to be below 30%. We are on track on that, and we have also introduced certain initiatives where some certain cost savings during 2026 are identified, and more importantly, also on the capital investments that we're doing in our infrastructure. As you can see, the quarterly expenses continue to be on the same trend that we wish them to be.
The overall cost mix continue to be stable, with more or less similar percentages. On page number 12, Nadir highlighted on our proactive approach from a risk monitoring as well as management. That has translated into a very solid positions in terms of NPL ratio, as well as the coverage ratio has slightly increased by 1 percentage point to reach 151.4%, while the quality of the portfolio continue to be of strong stand. The impairments for credit losses, as you can see, has benefited from recoveries that I did mention. Still, I think, the last year, Q1 2025 recoveries were one of the strongest quarter.
We also focus on the recoverability of our non-performing assets as a whole. Particularly, there will be some timing differences this year because I think the first half of this year comprises of two Eids and one Ramadan. The seasonality impacts the level of collections as well as the business activity and overall. On the following slide, number 13, if we put all these factors together, that's basically the picture which drive the 5% increase on the bottom line to reach SAR 2.6 billion for Q1 2026. I think the operating income is on track, which is the main components for us, so that our engines are working very properly.
The net operating income, before provisions, is also showing a very positive trend. The profitability in terms of ROE and ROA has lowered down, but I think one is for ROE, a part, or a significant part of this decline is due to the increasing capital base of the equity. I think that is a positive note. While the ROA has been impacted by the transitory deposits that we get, so it has increased the overall balance sheet footing. I think overall, excluding these, they are on target based on our internal metrics.
On the following page, I think it's very important to continue to reiterate, we have been working on our along when we did our annual operating plan, as well as on our capital and funding plan. These plans are being materialized as per our expectations. The growth in you see that in the regulatory capital is as per our plan, which is showing a very healthy trend. The internal capital generations velocity is very positive, so we retain back into a positive territory while we are registering a 10% plus increase on a capital supply vis-a-vis the capital demand.
That puts our capital ratios in a very strong positions saying that we are also ready to absorb the counter-cyclical buffer introduction, which is in May 2026. I think this is has been already reflected and integrated in our business plan. On the guidance, I think Nadir has briefly pointed out the key themes around the regional situations, the geopolitical situations, and I think we're very cautious. We are observing and monitoring our customers as well as any potential impact that might evolve in the near future. Our guidance still intact. We believe that it is too early to start to judge the any potential impact.
In reality, I think we have seen a very strong growth in liquidity in the system as well as in the bank. I think we are getting very close to our customers, so far, there are no any material things that we need to account for at this stage. Our guidance stays on track, so we are guiding for high single digits in terms of loans, which we believe that the second half would be a much more stronger in terms of lending activities. Our net special commission income is on track on that trend.
I think it's very important to highlight that the 3% growth in the net special commission income compared to a similar period last year is at one of the highest margin comparable period. As we progress throughout the year and selective and opportunistic deployment of investments into the financial market as well as the pipeline of our lending activities, this will pick up. Our cost to income ratio is on track, we're just at 29.7%. Our return on equity is on track. Cost of risk is slightly above the range, but I think we are comfortable with the level that we have at this stage. The tier 1 capital is well above the guidance.
I think, this summarizes the overall financial results for the first quarter of 2026, and hopefully, Inshallah, things will be in a greater shape in the near future and beyond. Operator, back to you for the Q&A session.
Thank you. As a reminder, if you'd like to ask a question on today's call, please use the Raise Hand button or use the Slido Q&A panel if you've joined us via Webex. If you've joined us via the phone, please press star one on your telephone keypad. We'll go to the line of Rahul Bajaj from Citi. Rahul, please unmute and go ahead.
Hello. Hi, this is Rahul Bajaj from Citi. Thanks for taking my questions. I have three actually quick ones. The first one is on your strategy, as you mentioned, to prioritize investment growth over lending growth in the first quarter. Just wanted to understand, is this the path you think you will continue for the near future? Is this path of prioritizing or growing investments over loans enough to generate high teen ROEs? Would the investment portfolio be enough to kind of get you to that high teen ROE levels? That's my first question. My second question is on the fee slowdown, and you kindly explained, Abdullah, the factors of the slowdown in the banking fees.
Just wanted to understand, is the regulatory change impact that you alluded to, the SAMA regulatory changes impact, is that completely factored in in the first quarter numbers? 2Q, we should expect banking fees to basically grow from current levels? You think, because the regulatory changes came in, I think, in February sometime, there is still a full quarter of sort of regulatory fee impact to be felt in 2Q numbers, so 2Q banking fee would be subdued as well? If you could please clarify on that would be useful. Third and final very quick question, Zakat rate, in the first quarter seemed to be much higher than historical run rate. I think it's roughly, it's over 12% of the pre-Zakat profits. Just wanted to understand what is happening there, will this normalize going forward to the historical levels? Those are my three questions. Thank you.
Thank you, Rahul. With respect to the first question, I think we have been always selectively and opportunistically adding to the investments portfolio. I think what happens during the course of the first quarter of this year, there were very good opportunities in the markets. The market has experienced some volatility. We wanted to capture that. I think that's one. Do we expect to maintain the same level of growth throughout the year? I don't think so. We will continue to add opportunistically. I think at the end of the day, we are a leading wholesale bank. Our commercial offering is the key driver of our business activities.
That will continue to do so, coupled with also offering products across both the treasury as well as the trade activities. The first quarter, given the regional political, geopolitical situations and the disruptions on certain logistics routes as well as the limitations of trade flows in terms of certain corridors, that have impacted I think the globe as a whole, as well as the region, as well as in terms of Saudi in a lesser way. I think we are more optimistic in the second half to capture these opportunities. That's with respect to the first question. With respect to the second questions on the fees, there are two components here.
There is a volume issue, a volume driver. There is also the rate or the new tariff. The rate impact is fully loaded. I think the volume one comes from the payment cards, including credit cards at large, because we witnessed a significant drop compared to last year's period in terms of the cross-border spends. This has very profitable drivers and has impacted this quarter. To answer your question, I expect in the following quarters this to improve. Everything else is constant. With respect to the Zakat rate, I think overall, I think the Zakat on a quarterly basis is an estimation.
I think the balance sheet structure that took place over the last also 12-18 months will impact the overall Zakat rate for 2026. That's our estimated level of rate for this quarter. I think we managed this on accrual basis. Overall, I think it inched up by 1.7% or so. I think there is a complete process around how we are optimizing our Zakat for the balance sheet, and this all the way linked to a certain business and assets allocations decisions. I think that's the level of comfort that I wanted to leave with you. Thank you.
Understood. Thanks. Thanks, Abdullah.
The next question comes from Mohammed Al- Rashidi from Hassana. Mohammed, please unmute and go ahead.
Hi. Salaam Alaikum. Thank you, gentlemen, for the call. Two questions from my side. The first one is regarding the assets quality for your MSMEs portfolio. If we see your NPL ratio for MSMEs, it's around 1.1%, which is significantly lower than other large banks. Other banks have 2x or 3x this NPL ratio. I just want to understand what's the reason. Is it slowly driven by Kafala exposure? Riyad has significantly higher contribution from Kafala. Or it could be explained by Riyad being the first mover in this segment and hence was able to capture a better credit quality exposure within MSMEs. That's my first question. My second question is regarding your credit risk-weighted assets on a quarter-over-quarter basis. It didn't move despite the growth being driven by MSMEs.
I'm wondering what drove this improvement in your RWA intensity. Is it a continuous RWA optimization initiatives? If that's the case, do you expect further benefits in the future? Thank you.
Thank you, Mohammed. With respect to the first question, I think, we are proud of this. I think both points what you have mentioned are key drivers. Yes, we are leading and the leader in SMEs. We established this more than 2 decades ago, we have a huge data as well as our experience throughout the journey and the internal capabilities that we have built have helped us. In terms of that one, yes, we are. Second thing, yes, because a significant portion of our book are Kafala, we are the largest Kafala, that has also translated into that one position. That's to answer the first question.
With respect to the second question, the credit RWA is a continuous part and the largest part of our RWA optimizations that we kicked in two years ago. We have done significant milestones on the IRRBB. We have done a significant milestone in terms of data quality that we have worked on. There is actually another phase of the data quality is on track, and with the whole idea is to make sure that we do reflect the most recent and the most accurate information to reduce the net exposure at default. That has contributed to a reduction in the credit RWA. Do we expect the same reductions on a quarterly basis?
I think it's very hard to answer this because I think there are a lot of moving variables beneath that, including, but not limited to, also changing the exposures, the maturing of loans, for example, settling loans and the new loans of a higher quality. There are a lot of factors that are impacting this. I hope I answered your questions.
Very clear. Allah.
The next question comes from Jon Peace at UBS. Jon, please unmute and go ahead. Hi there, Jon. Can we check you're not muted locally, please?
Hi. Can you hear me now?
We can.
Great. Thank you. Sorry about that. First question, please, is on asset quality. I see you changed just slightly the language of the drivers, although you've kept the range the same, and you highlight the focus on recoveries will help support the cost of risk. I wonder, are you anticipating or have you taken any overlays for the current situation, and that you expect those to be offset with some recoveries? The second question, please, is on loan growth, the high single-digit target. How do you see that splitting out in corporate versus retail for the rest of the year? Finally, could I just ask with regard to the potential IPO of Riyad Capital? I think you're still waiting for regulatory approval. Is that something that you expect soon and would be high on your priority list to execute? Thank you.
Thank you, Jon. With respect to the assets quality, as I highlighted at the beginning, we are very closely monitoring our customers, and in particularly, we are getting closer than before in terms of their cash flow dynamics on this volatile period. We will continue to do so because the longer it takes in terms of if this does not get resolved, the businesses will start to feel that filtering through a certain activity. That is an area of focus by itself. At the same time, when I mentioned on the recoveries, because we do have a very good potential on monetizing certain exposures. We are prioritizing this. We are focused.
I did mention 2 years ago that we have established and now it is one of the very sophisticated large team in the bank, which we called it the special assets. They have been mandated to increase that recoveries, try to basically realize the value of that over time. We do expect a good recovery amount in the Q2, but I think these are time bounded. Sometimes it spills in terms of realizations because corporate are different than the retail, but the focus is there. This is with respect to the recoveries. With respect to the Riyad Capital IPO, I'll hand it back to my colleague, Nadir. He would provide you with the update.
As you correctly mentioned, Jon , we have already submitted the application for registration and public offering and also listing on Tadawul. The IPO is currently subject to regulatory approvals. Obviously, the timing of listing will depend on market conditions and final approval from the bank. The priority now is to ensure the IPO is launched at the right time, deliver the best outcome for our shareholders. Thank you.
Thank you.
The next question comes from Abdullah Al- Buraidi from Emirates NBD. Please go ahead and unmute. Hi, Abdullah. Can I check you're not muted locally, please?
Hello, can you hear me?
We can hear you.
Yeah. Yeah. Thank you very much for the great presentation. Light the graph and congrats for the very great result. On the NIM, we noticed that quite an adverse spread in the cost of funding is in that the spread in the cost of funding has increased compared to the benchmark, while the asset yield decline, and sorry, the asset yield decline compared to the benchmark in terms of the spread, which is understandable given the duration of the bank. We noticed that the net interest income quarter-over-quarter have declined despite a decline in interest-bearing liability and an increase in the interest-bearing assets. Could you confirm that such a move in the balance sheet happened at the end of the quarter, which resulted in such?
The second question regarding the guidance, you're still guiding for a high single-digit net special commission income growth despite achieving a low single digit in this quarter. You expect the improvement in the net interest income to be backloaded in the year? The third question regarding stage two and three increase. We noticed that both of them has increased to quite the highest level since 2023. Would that be a source of worry or not?
First of all, I'll try to address what I have captured. I think it's the questions has multiple components. First, when it comes to the NIM, I think I clearly highlighted that the cost of funds for Q1 is fully loaded with all the debt issued from April until 31st of March. That's when you compare it to the Q1 2025. If you compare it to Q4 of last year, I think it has declined by almost 40 basis point as a cost of fund.
Yeah, I'm comparing it to the benchmark.
The benchmark has declined by 55 compared to last quarter, roughly by 18 basis point, and to the same period last year is around 58 basis point. The asset yields will move into the as the repricing of the benchmarks filters through the balance sheets throughout the loan book. It will be impacted, and we have seen that starting from last year and this quarter. I think the thing that I wanted to leave with you is that the decrease in the benchmark and the cost of funds was offsetted by a higher cost of funds coming from the debt securities as compared to the customer deposits. That's what I'm trying to highlight here. I think it is on track.
It is as per planned, and I think this is where we are comfortable with. Aside from that, I think we are doing over and on top is to compensate the falling asset yield due to the benchmark through an active and dynamic continued repricing exercise that we have commenced in Q3 2025. I think that is an ongoing, and we continue to aim and with that, we try to offset as much as possible with an increased margins. I give you an example how we are doing this. We had get some settlements in loans where we redeployed that capital into a higher margin loans, which we have offsetted the falling yield on that one. That with respect to the margins.
With respect to the asset quality on the migrations from stage one to stage two and from stage one and two into stage three, as well, of course, we monitor this very closely. We deal with problem loans and potential problem loans very, very carefully and delicately, and we continue to monitor that. Every quarter, there is a complete run of the whole exposures, and some exposures will automatically, due to missing payments, they will be migrated from stage one to stage two. I think from stage two to stage three, we do this.
We have a greater scrutiny around the process because the transfer from stage two to stage three, that means there will be an additional ICU process, as we call it internally, that we need to make sure that this exposure get dealt with the right even teams. Aside from the business.
Yeah. Thank you. This is pretty informative. You are quite confident on the net commission income guidance?
As I highlighted, I think our guidance is still intact. As we progress through the course of 2026, we do expect that margin to continue to support our guidance of high single digit. If we come to a point where we think that this is unlikely, we will definitely update the investor community through a revisions of our guidance.
Okay. Thank you very much. Quite informative.
Our next question comes from Waruna Kumarage from SICO Bank. Waruna, please go ahead and unmute. Waruna, can I check you're not muted locally? We will move on. Our next question comes from Olga Veselova from Bank of America. Please go ahead and unmute.
Thank you. Thank you and good day. Thank you for hosting this presentation. I have three questions. One is on cost growth. We welcome the progress and optimization, and I think the delivery of flat cost growth year-over-year is a good result. You do mention that you optimize. What exactly are you optimizing? Do you think there is more room to continue optimization this year? That is question number one. Question number two is on deposits. During your presentation, you mentioned that some of deposits had transitory nature. What exactly is this transitory nature? Did they come from government-related entities? Are they short-term? Why do we expect they will migrate away from Riyad? Question number three is on asset yield. Actually, a follow-up to the previous question.
When I look at your erosion of asset yield quarter-over-quarter, 32 basis points in our numbers, it is more than 18 basis points decline in average SIBOR quarter-over-quarter. This is despite your repricing of loans since third quarter and despite SMEs growing faster than all other types of portfolios. Why do you think is this happening? By how much have you increased spreads by now? Do you think there is more room to continue increase spreads going forward, or that's more or less completed process? Thank you.
Thank you, Olga. With respect to the first questions about the cost and cost optimizations, as you recall, even from previous years, we started this. Now it's year six since the first program that we have launched, which basically addresses all cost objects that is part of the operating expenses. Two years ago, we had focused a little bit on a certain operating models within when it comes to the staff and how they are basically set within the bank. Now the final things that we are doing in terms of as a journey is to look at the procurements end to end.
That not will only realize some early or hang low-hanging fruit, but I think more for the future and CapEx as a whole. We will continue to do the G&A as one of the most active, I would say, category. I think in terms of renegotiating contracts, this is underway, so we've started to see the impact filtering throughout the year, 2026 and 2027 as well. This will continue. Does it mean that in Q2 that we will continue also to run a flat cost? No, I think we do have an investments plans.
We do have a rollout in terms of other. We are very vigilant around how much we are adding to the cost base, as well as how we are growing at what rate in terms of the cost base. We will continue to manage this. Staff cost has not been growing over the past two years in any alarming way. I think it is modestly grown, which is, I think, as per our plan as well. We continue to manage that at very delicate basis. In terms of deposits, transitory, it come and go. We know that it stays for a couple of days, it went out. I think we have benefited from that.
We have benefited in terms of the deployments, and we have taken any advantage of that. This is not the first time, and it won't be the last time that the transitory deposits that it happens with Riyad Bank. The third one, in terms of asset yields, I think the when I say the repricing is not. For example, if we have a SAR 270 billion book of corporate. It doesn't mean that the SAR 270 billion will all reprice.
I think we are doing the repricing in a very selective as well as in a proper way so that we continue to benefit, we continue to manage our customers, we continue to make sure that we get the value, whether through the direct repricing or through other ancillary business as well. I think that's a journey that we have kicked in, and we are focused, and there are a reporting mechanism to the all senior management team, including also the CEO, who look at this in a periodical basis. It will take time, and it will take.
There are also things that it happens where we were able to secure an ancillary business where we did fantastically well and secured a few transactions that our treasury team have done, which compensated through a certain repricing efforts. I think this is an ongoing progress. What we have seen, that we selectively started to add on the retail book. We wanted to build a certain affluent, strengthen our affluent focus segments. We're attracting basically the NIBs as well as investments accounts, et cetera. We offer this on a selectively basis and a competitive rates for individuals. In any shape or form, that does not change the overall impact, the yield of the bank. I think the most of the impact that you see is a filtrations of the lagging effect of all the rates cuts that happening at large. Thank you.
Mm-hmm. Thank you. Thank you for answers.
The next question comes from Murad Ansari from GTN. Murad, please unmute and go ahead.
Assalam Alaikum . Thank you for the presentation. Just one question from me on the loan growth side. I mean, if we look at the corporate book in particular and, you know, I think since last year it's been the SME book which has been the, you know, the a very strong growth driver for the overall loan book for Riyad Bank. And given how much of the book has expanded over the last twelve months, I wanted to get a sense if because my understanding, or, and you've said before that, you know, within the SME book, your majority of the portfolio is towards the medium sized companies. That was my understanding.
With this growth that we've seen over the past 12 months, has there been any change in mix, any significant one in terms of, you know, towards the smaller sized entities? Secondly, just if you could, you know, maybe talk about the growth in this segment. What's this is a growing market. How fast is it going in general? You know, is your market share something that you continue to see improving over here? Just that. Thank you.
Thank you, Murad. Maybe it's also a good opportunity to reflect on that comparables. It is very important to highlight that in Q1 2025 was having a different classifications because we unified our classifications with SME authority from Q2 onward. There are a reclassification if inflation on the percentage growth that you have seen year-over-year. I think to be more precise, I think it's more comparable to last quarter of the 2025. If I compare the last quarter, 2025, the whole book is grow by 3.6%, roughly around 4% growth, Q1 versus Q4 2025. I think that's very important because we haven't just grown the book in one year with that amount.
I think the 4% growth versus last quarter is the right comparable figure. That's one. The second thing, if you allow me, I think it's also important that I reiterate that almost 30% of the SME loans are in the form of the medium, which are the highest category, and followed by around 40%, followed roughly by 36%, which are the small, not the micro, so the middle segments within the SMEs. We had mentioned earlier, late 2024 and early 2025, we wanted to also to focus on the micro so that we increase the granularity as well as the payments and the funding sides. That has grown to be almost a quarter of the SMEs. That is the mix of our SME book as of 31st March 2026.
I think that book, the Kafala continue. We are the largest Kafala. It continue to have a sizable amount of our book. I think over the last two years, majority of the growth are non-Kafala or, I can see predominantly non-Kafala. I think it's very important to highlight this. I hope I clarified the SME components to you.
Yes. Thank you so much. In terms of just the market opportunity and the growth that you're seeing in that segment, how do you see that? I mean, is that something that you can continue that you can see growing at, let's say, high double- digit or 20%+ ? Or is it more moderate 10%-15% kind of growth that we should expect in this portfolio?
Murad, this is Nadir Al-Koraya again. MSME is an important part, and it's actually main pillar of our strategy 2030, and we are doubling down. We are the MSME bank in Saudi. We have the highest market share of around 25%, and we would like to continue this position. We've done so many initiatives on this sector. We developed a digital first MSME model, full end-to-end digital proposition to improve the turnaround time and the process. We're expanding this through our corporate ecosystem, government partnerships. The goal is to accelerate MSME growth and penetration. Thank you.
Thank you so much.
This is all the time we have for questions. Before I hand back to the management team, I would like to highlight that if you have any unanswered questions, you may send them to the investor relations team. With that, I'll hand back to the management team for any closing comments.
Thank you everyone for joining us today. We are pleased with our performance in the first quarter of 2026, which reflects the strength of our strategy and the precision of our execution, even in a dynamic environment. Looking ahead, we remain confident in our trajectory and focused on delivering on our strategic priorities. We appreciate your continual interest and look forward to updating you in the coming quarters. Thank you again for your time, goodbye.
This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.