Pricing of loan deals in Saudi Arabia is still under pressure, and could fall further, according to the head of one of the kingdom’s largest banks.

“There is still a lot of capacity in the bank market [for new deals], so I wouldn’t want to say loan pricing won’t fall further,” says David Dew, managing director of Sabb.

“There is tremendous competition for good quality assets, and that is particularly being felt on pricing,” he adds. “It is definitely a good time to be a quality borrower.”

Most recently, local telecoms firm Etihad-Etisalat (Mobily) has said it will pay banks just 65-70 basis points above the Saudi interbank offered rate (Sibor) for a SR10bn ($2.6bn) loan deal. As pricing on deals falls, it becomes less profitable for banks to lend.

“Lending would probably be unprofitable on a standalone basis, but from the perspective of Sabb, we are satisfied with the ancillary business we generate from lending,” says Dew. “I’m not sure if all banks will be able to say the same thing.”

Dew adds that he expects credit growth to be around 10 per cent this year and to remain at a similar level in 2012.