RIYADH, (Reuters) – Two large Saudi banks sharply increased provisions for loan losses during the second quarter, official data showed on Wednesday, amid concerns over the solvency of some debt-laden private Saudi firms.
Banque Saudi Fransi booked 120 million riyals ($32 million) in provisions for loan losses during the second quarter, according to data released on the Saudi stock exchange.
Fransi’s audited financial statements show it booked a little below 10 million riyals in provisions for loan losses in the same period of 2008, 46.1 million in the first quarter of 2009, and 287.5 million in the fourth quarter of 2008.
The Saudi affiliate of France’s Calyon has posted a 10.6 percent drop in second-quarter profit.
Samba Financial Group, the country’s second-largest lender by market value, booked 97.3 million riyals in provisions for loan losses during the second quarter, against 37.8 million in the year-ago period, 203 million in the first quarter and 141.6 million in the fourth quarter of 2008.
Samba posted a 1.6 percent rise in second-quarter net profit.
The data published on the Saudi stock exchange did not say why these provisions have been made.
In recent weeks, several banks in the region have offered details on their exposure to Saad and another Saudi family firm, Ahmad Hamad Al Gosaibi Group & Brothers (AHAB), which are facing a debt crisis.
Both firms are restructuring debt worth billions of dollars and a substantial chunk of it is owed to Saudi banks. Like the kingdom’s central bank, Saudi banks refrained from making any statement about the two firms.
Earlier on Wednesday, Standard & Poor’s said it found banks in Saudi Arabia and the United Arab Emirates to account for almost two-thirds of the total net exposure of 30 commercial banks it rates in the Gulf Cooperation Council (GCC).
“Total exposure net of tangible collateral to the two groups is significant but manageable for sampled rated GCC banks,” said Standard & Poor’s credit analyst Goeksenin Karagoez.
Standard & Poor’s said it had access to information related to the exposure of each Gulf bank but the data was confidential.
“Exposure to the groups varies significantly among the sampled GCC rated banks, from no exposure to net exposure of more than 20 percent of a few banks’ adjusted total equity,” the credit rating agency said.