RIYADH, (Reuters) – Three of Saudi Arabia’s biggest banks had mixed fortunes in the third quarter, with SABB reporting its lowest quarterly profit in four years after it increased its provisions for bad loans.
Riyad Bank, the No.3 lender, saw its net profit surge 48 percent on higher income from non-lending operations while Samba Financial Group 1090.SE, the kingdom’s second biggest lender by market value, saw its net profit inch up 0.7 percent.
Riyad Bank and Samba may have also been hard hit by loan loss provisions, but that will not be clear until they publish their detailed financial statements later this month.
Several banks said in research reports that Saudi banks’ profitability would continue to be strained by provisions for possible loan losses linked to troubled conglomerates Saad Group and Ahmad Hamad Algosaibi and Bros Company (AHAB).
However, Hesham Abu Jamea, the head of asset management at Bakheet Investment Group, said it was a slowdown in lending, not provisions were the concern now.
“The situation is improving significantly on the provisions front. The problem now is slow lending. This needs to be solved,” he said.
SABB, the country’s No.4 bank, which is 40-percent owned by HSBC, said its net profit in the three months to the end of September was 570 million riyals ($152 million) against 711.1 million riyals a year earlier.
It was SABB’s lowest net profit since the first quarter of 2005 when it made 455.9 million riyals.
The lender raised its loan loss provisions by 505 million riyals in the nine months to the end of September.
SABB also reported that loans fell by 5.7 percent from the previous year but it saw a 13.1 percent rise in net lending income and a 10.7 percent rise in its net operating income.
SAMBA BEATS ESTIMATES
Samba’s net profit rose to 1.21 billion riyals, beating a mean estimate of 1.06 billion in a Reuters poll and compared with 1.2 billion a year earlier.
Bakeet gave the closest estimate of 1.2 billion.
“We had expected Samba had to make less provisions for loan losses during the third quarter compared to the first half of 2009. We based our estimates on 112 million riyals (in provisions) for the third quarter against 300 million riyals during the first half,” Abu Jamea said.
Samba said its net lending income rose 8.9 percent and net operating income grew 3 percent in the third quarter, while its loans fell 10.4 percent in the nine months to the end of September compared to a year earlier.
Riyad posted a net profit of 759 million riyals in the third quarter compared with 512.6 million riyals a year earlier after income from its non-lending operations soared.
Abu Jamea said that Riyad could have boosted its third-quarter earnings by withdrawing from some of the provisions it previously had made.
“Riyad made huge provisions in the first half, about 510 million riyals. That seemed to be too much”.
Riyad said that while its loans rose by almost 18 percent to 106.1 billion riyals for the nine months to the end of September, its third quarter net income from lending rose only 1.4 percent to 1.03 billion riyals.
The bank said net operating income rose 32.4 percent to 1.4 billion riyals and that net income from non-lending operations rose to 374 million riyals, up from 45 million riyals a year earlier.