RIYADH, (Reuters) – Riyad Bank 1010.SE posted a 6.8 percent rise in second-quarter profit mainly on higher lending, triggering positive reaction in other Saudi banking stocks after modest performances in the two previous quarters.
Saudi Arabia’s fourth-biggest lender by market value topped most analysts’ forecasts with profit of 906 million riyals, or 1.06 riyals per share, in the three months to June 30, compared with 848 million riyals, or an adjusted 1 riyal per share, in the year-earlier period.
The average forecast of four analysts polled by Reuters last month was for quarterly profit of 841.15 million riyals.
“These earnings confirm the bank’s continuing drive towards focusing and expanding core banking activities and developing assets,” the bank said in a statement posted on the bourse website.
Net operating income rose 3 percent after loans grew 44 percent at the end of June against a 23 percent rise in deposits, it said.
Net lending income — the largest component of operating income — rose 23 percent while net banking services fees climbed 21 percent, Riyad Bank said.
The pace of net lending income growth slowed from the first quarter, when it rose 27 percent year on year. Net banking income growth picked up from 15 percent in the first quarter, according to Reuters data.
Riyad Bank did not say how much it earned from non-trading investments, net exchange income or net trading income.
The announcement, the first by a Saudi bank this season, propped up the stock to close 5.1 percent higher and pulled along banking stocks on Sunday.
The benchmark banking and financial services index added 3.75 percent on Sunday, the strongest sector index rise of the day, reducing to minus 25 percent its year-to-date performance.
Hisham Abu Jamea, whose brokerage firm Bakheet Financial Advisors came closest in the Riyad earnings forecast survey, said the bank’s earning could indicate Saudi banks are starting to see off the worst of the subprime crisis’ impact.
“We were expecting banks to show profit growth in general and get out of the subprime crisis … after they have made provisions for credit and investment losses in the two previous quarters,” he said.
All Saudi banks, to the exception of HSBC’s affiliate SABB bank 1060.SE, have kept silent about possible repercussions of the subprime crisis on their books, although Saudi central bank governor Hamad al-Sayyari said in January that this impact was “very limited”.
SABB said in April that its shareholders are largely protected from global financial issues, including the subprime mortgage crisis in the United States.
Saudi banks’ earnings have generally underperformed peers in the region over the previous two quarters: Saudi Hollandi Bank 1040.SE for instance reported a net loss of 106.3 million riyals in Q4 which it attributed to “credit losses”.
“(Saudi banks) cleared their books in the previous two quarters,” Abu Jamea said.
The Saudi central bank has tightened bank lending restrictions this year as it fights decades-high inflation.
Banks in the world’s largest oil exporter have moved away from relying on income related to stock market activities since a regional stock market crash in 2006. The Saudi index .TASI is the Gulf region’s worst performer this year.
Shares of Riyad Bank are down 26.8 percent so far this year, compared with a 14.1 percent decline for the main index .TASI.