First-quarter results from banks operating in the kingdom have been at the low end of expectations. It had been widely expected that the sector would benefit from a fall in provisioning needs, but this did not apply across the board. Al Rajhi Bank, the kingdom's biggest Islamic lender and the second-largest listed firm in the Gulf, saw profits increase by a mere 1%, to US$453m, and the country's second-biggest lender by market value, Samba Financial Group, saw profits dip by 7.1% to US$299m. In contrast, however, an HSBC affiliate, SABB, posted a 20.9% increase in net profits to US$200m, while Riyad Bank reported an 8.5% rise in profits to US$198m and the Saudi Investment Bank (SIBC) announced that its profits had increased almost eightfold to US$55m.
More, however, will be expected from the kingdom's banks throughout the rest of the year. According to research carried out by Jadwa Investment, seven of Saudi Arabia's top banks have loan-loss coverage of over 100%. In total, Jadwa said that total provisions for credit losses covered 109% of bad loans at the end of last year, compared with 86% at end-2009, with the Saudi Arabian Monetary Agency (SAMA, the central bank) now indicating that it is satisfied with the overall level of provisioning. In addition, higher deposits in Saudi banks because of recent bonuses mean that even as lending to the private sector rose by 2.9% in the first quarter—its quickest rate since the financial crisis began—banks' loan/deposit ratios are still comfortable. Consequently, with plenty of cash at hand and little need to increase provisioning, Saudi banks are well positioned to expand lending.
|Interim Saudi bank results|
|1 Qtr||1 Qtr||1 Qtr||1 Qtr|
|National Commercial Bank||1,442||1,517||264,823||298,882|
|Samba Financial Group||1,210||1,123||186,000||191,000|
|Al Rajhi Bank||1,684||1,700||172,000||203,000|
|Banque Saudi Fransi||714||717||121,246||126,547|
|Saudi British Bank||621||751||120,500||126,000|
|Arab National Bank||634||587||110,100||120,500|
|Saudi Hollandi Bank||230||238||59,700||51,000|
|Saudi Investment Bank||28||208||49,492||51,219|
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Elsewhere, first-quarter results from other listed companies tended to reflect the high cost of oil and the impact of a two-month salary disbursement to most Saudi employees, authorised by King Abdullah. In the case of the Saudi Basic Industries Corporation (SABIC), the petrochemicals giant, the impact of increased production was augmented by high oil prices, allowing profits to rise by 42% year on year, to over US$2bn. Meanwhile, retailers, which saw a 23.1% quarterly increase in profits, seemed to benefit from a spending splurge in the wake of the salary increases and one-off bonus packages. Separate data produced in April by SAMA showed that the value of point-of-sale transactions rose by 23% in March, while the value of cash withdrawals from ATMs was similarly up by 19%.