SNB and Al Rajhi's third-quarter 2026 results show that the bank with the most assets is not necessarily the most profitable. What is the difference between a bank's size and its profits? How do deposits, financing, and investments generate income? And what remains after operating costs and the risk of default?

Third-quarter 2026 results revealed a striking contrast between two of Saudi Arabia's largest banks. Saudi National Bank (SNB) reported assets of SAR 1.26 trillion, compared with SAR 1.08 trillion for Al Rajhi Bank. Yet Al Rajhi posted net profit of SAR 7.11 billion, ahead of SNB's SAR 6.45 billion.

How can a smaller bank earn more?

To understand this contrast, we first need to know how a bank operates and the difference between the funds it manages, the revenue it generates, and the profits it retains.

What are assets? Does the bank own them?

When you deposit SAR 10,000 in your bank account, the money remains yours, and the bank is obligated to return it under the terms of the account.

That is why your deposit is recorded on the bank's balance sheet under liabilities—money and obligations owed to others—not as profit earned by the bank.

By contrast, when a bank provides financing to buy a home, the amount owed by the customer becomes part of the bank's assets, because it represents a financial claim to collect the financing installments.

A bank's assets therefore include financing provided to individuals and businesses, investments in sukuk and securities, cash balances, and other items.

These assets are funded by customer deposits, financing the bank obtains from other parties, and shareholders' equity.

Assets therefore reflect the scale of the resources and financial claims managed by a bank—not the amount of profit it has earned.

This helps explain part of the difference between SNB and Al Rajhi.

At the end of September 2026, SNB's investments stood at around SAR 324 billion, compared with SAR 178 billion at Al Rajhi. This is one of the key differences in the makeup of the two banks' assets.

How do banks make money from funds?

A bank's business model is based on putting funds to work in activities that generate returns, primarily financing, investments, and banking services.

Suppose a bank provides a customer with financing of SAR 100,000 and earns SAR 6,000 in financing income over a year.

That amount is not the bank's net profit, because providing the funds for the financing comes at a cost.

If obtaining those funds costs SAR 3,000, the bank is left with SAR 3,000 in net financing income in this simplified example, before operating expenses, potential credit losses, and other items are taken into account.

The relationship between the return a bank earns on financing and the cost of the funds used to provide it forms the basis of the net financing margin.

Banks' revenue is not limited to financing. They also earn income from investments, banking service fees, cards, transfers, asset management, and other activities.

So it is not enough for a bank to have a large financing portfolio. What matters is the income it generates, the cost of obtaining the funds, and the risks involved.

What do SNB and Al Rajhi's figures tell us?

Looking at financing at the end of September 2026, Al Rajhi's portfolio stood at around SAR 775 billion, compared with SAR 758 billion for SNB.

In other words, Al Rajhi had around SAR 17 billion more in financing, despite having fewer total assets.

But the income generated by financing matters more than its size.

In the third quarter, Al Rajhi earned SAR 7.66 billion in net financing income, compared with SAR 7.62 billion for SNB.

The difference was small, at around SAR 42 million.

Meanwhile, net income from investment commissions amounted to SAR 955 million at Al Rajhi, compared with SAR 431 million at SNB.

These figures show that a larger investment portfolio does not automatically mean higher net income from those investments. Revenue also depends on asset returns, the cost of funding them, and the nature of the investments.

Including other banking activities, total operating income reached SAR 11.12 billion at Al Rajhi, compared with SAR 10.37 billion at SNB.

This is where the difference between the scale of a bank's business and its ability to generate revenue from it becomes clear.

Does everything that comes into a bank become profit?

No.

Banks need employees, branches, and technology and operating systems, and incur administrative and other expenses to provide their services.

According to third-quarter results, Al Rajhi's operating expenses before credit-loss provisions were around SAR 2.36 billion, compared with SAR 2.72 billion for SNB.

But expenses alone are not enough to judge efficiency. A bank may spend more because it manages a larger business or provides different services.

Analysts therefore use a metric called the cost-to-income ratio.

The idea is simple: for every SAR 100 a bank earns in operating income, how much does it spend to run its business?

Using total operating expenses before provisions divided by operating income, the ratio for the third quarter was approximately:

  • 21.2% at Al Rajhi: It spent around SAR 21 in operating costs for every SAR 100 of operating income.
  • 26.2% at SNB: It spent around SAR 26 for every SAR 100 of operating income.

This is a simplified calculation and may differ from the adjusted metric banks report under their own accounting definitions.

The comparison suggests that Al Rajhi had lower operating costs relative to its income during the quarter.

But operating expenses are not the only costs that affect profits.

What if some customers fail to repay their financing?

This is one of the key differences between banks and other companies.

When a bank provides financing, it expects to collect the agreed installments and profits. But some customers may fall behind on payments or be unable to repay.

Accounting standards therefore require banks to estimate expected credit losses and recognize them in their financial statements.

These are known as credit-loss provisions.

A provision does not necessarily mean that money has left the bank, nor does it mean that all the loans associated with it have actually defaulted. It is an accounting estimate of potential losses based on the information available and the expected risks.

In the third quarter of 2026, Al Rajhi recorded net provisions for credit and other losses of SAR 852 million, compared with SAR 323 million at SNB.

In other words, Al Rajhi bore a larger provision burden during the period.

This is important when interpreting profits: a bank may earn high financing income, but part of that income is affected by the provisions it recognizes to cover the risk of non-payment.

Provision levels alone are not enough to assess financing quality. It is also important to consider the size of the portfolio, the non-performing loan ratio, provision coverage, and how these indicators change over time.

Why did Al Rajhi earn more despite SNB being larger?

The third-quarter results can be summed up in three interconnected factors.

Al Rajhi generated around SAR 749 million more in operating income and recorded around SAR 359 million less in operating expenses. However, it also bore around SAR 529 million more in provisions, in addition to the effect of other items that go into calculating net profit.

Taken together, these factors resulted in Al Rajhi reporting net profit around SAR 656 million higher than SNB's.

But this comparison does not mean that Al Rajhi outperforms SNB on every measure. SNB has a larger asset and investment base and also recorded stronger growth in financing and deposits in the third quarter compared with the previous quarter.

The economic lesson here goes beyond the competition between the two banks.

Assets tell us how large a bank is, operating income tells us how well it can generate revenue, and profits show what remains after costs, risks, and other obligations.

So when we read news about a bank's profits, the most important question is not just: How much did it earn?

It is also: Where did those profits come from, how much did it cost to earn them, and what risks did the bank take on to generate them?

That is where a true economic reading of financial results begins.