RIYADH, (Reuters) – Samba Financial Group, Saudi Arabia’s second largest-bank by market value, posted its second straight quarterly profit decline, missing all analysts’ forecasts due to a drop in brokerage income.
Profit fell 5.7 percent to 1.22 billion riyals ($326.4 million) in the three months to June 30 compared with the year-ago period, it said in a statement on the bourse website.
The earnings missed all six forecasts of analysts in a Reuters survey last month ranging from 1.25 billion riyals to 1.45 billion riyals.
Samba second-quarter earnings were the worst among the kingdom’s top five listed banks.
“(The fall) was due to a decline in income from financial brokerage,” Chief Executive Eisa al-Eisa said in the statement. The bank did not disclose brokerage revenue.
The Saudi bourse’s benchmark index .TASI has been the worst performer in the Gulf Arab region so far this year and trading volumes dwindled in the second quarter, hitting brokerage fees.
Samba’s first-quarter profit was down 5.4 percent also due to lower bourse-related revenues.
Samba’s position among the top three brokerages made it vulnerable to bourse fluctuations, said Ibrahim al-Alwan of KSB Capital, which had the closest forecast for Samba’s earnings.
“Samba has managed the largest IPOs of the year but the brokerage industry is still aching, although the other four largest banks have overcome this situation,” Alwan said.
In April, a unit of Samba led-managed Alinma Bank’s 10.5 billion riyals IPO, the kingdom’s biggest, earning the bank about 200 million riyals, sources said.
“Samba should have done better given both its size and the conditions that prevailed in the second-quarter,” Alwan said.
Second-quarter earnings of the other four largest banks rose by between 6.3 and 25 percent and at least met analysts’ forecasts. Some of them even posted a rise in brokerage income.
Based on Reuters calculations and Samba’s previous financial statements, operating profit inched down to 1.88 billion riyals in the second quarter from 1.89 billion riyals a year earlier.
Net income from lending operations inched up to 1.2 billion riyals from 1.19 billion riyals in the second-quarter of 2007.
Income from non-lending operations was at around 682 million riyals in the second quarter against 695 million riyals in the same period of 2007, of which 57 percent was from brokerage fees.
Non-lending income also includes gains from foreign exchange transfers, income from the fair value of acquired financial instruments, trading income and net gains from non-trading investments.
Investors punished the stock, which lost almost 7 percent after the earnings were announced, adding to the 34 percent it has lost so far this year.
The economy of top oil exporter Saudi Arabia is surging on a more than six-fold rise in oil prices since 2002, which is driving investments in industrial projects, infrastructure and property, and giving local banks many financing opportunities.
But as inflation soars, the central bank has tightened bank lending curbs three times since November to rein in credit growth.
“I don’t think these restrictions had much of an impact on banks in general as shown by the earnings that were announced so far,” Alwan said.
Samba can still close the year with a net profit 10 percent above the 4.8 billion riyals it made in 2007, Alwan said.
“But this can only happen if it manages to clinch more IPO mandates by year-end, the only problem is there are no IPOs of Alinma’s size left for this year,” Alwan added.