Saudi Arabia's stimulus measures and close monitoring by the central bank have paid off as loan growth is accelerating and liquidity picking up in the kingdom's banking sector.
Monthly loan growth has hit its highest this year, data from the Saudi Arabian Monetary Agency (SAMA) and Morgan Stanley showed.
Loan growth in September rose 1.3 per cent compared with August, for a growth rate of 5.1 per cent for the year so far, exceeding Morgan Stanley's 5 per cent growth estimate for the full year.
Public sector loans also showed strength, growing 9.6 per cent in September from a weak August.
As liquidity has recovered so has the sector's balance sheet, which picked up 1.3 per cent in September after contracting for two months.
The country's real estate development fund, set up in the 1970s to provide property loans to citizens, is also forecast to strengthen the sectors' loan portfolio.
The fund recently abolished a rule that individuals must own land to qualify for a loan of 300,000 riyals, which should make home ownership available to a bigger cross-section of the population.
"This is like heaven for the banks," said Alfred Fayek, the head of equity sales at EFG-Hermes. "It will give the sector more for its loan portfolio. Saudi Arabia has one of the highest populations within the GCC and the property sector is booming, so it's a great move."
Saudi Arabia's GDP of 1.41 trillion riyals and population of 27 million has given the banks a stronger base for loan growth than institutions in many other GCC countries.
On the down side, Saudi banks experienced their lowest monthly earnings for the sector so far this year.
Aggregate sector earnings in September contracted 84 per cent compared with September last year - the sharpest drop this year.
But the ratings agency Moody's Investors Service expects the banking sector's net income to be modestly higher in the fourth quarter and into next year compared with the past two years.
The earnings show banks are looking to clean up their non-performing loans and come out next year with a clean balance sheet, Mr Fayek said.