Saudi banks perform better in 2012

Saudi Arabia’s banks met expectations and recorded higher net earnings in 2012 as they benefited from lower provisioning and an upturn in domestic business.

The Gulf kingdom’s 11 listed banks netted around SR28.6 billion last year compared with nearly SR25.6 billion in 2011, an increase of about 12 per cent, according to their balance sheets, published in the Saudi daily Aleqtisadiah.

The report did not include the country’s largest bank, National Commercial Bank (NCB) which is not listed on the local bourse.

In the fourth quarter, the combined profits of the 11 banks swelled by around 10 per cent to SR6.6 billion from about SR six billion in the fourth quarter of 2011.

Analysts attributed the high earnings this year to a surge in domestic credit as banks are slowing down their bad debt provision build up and taking advantage of an upswing in the economy and in public sector projects.

The surge in domestic credit followed a sharp slowdown in previous years in the wake of the 2008 global financial distress and the ensuing debt default problem by two Saudi family businesses.

Slackening domestic credit allied with a rise in provisions to trim Saudi banks’ net profits to around SR26.8 billion in 2009 from SR29.9 billion in 2008. Profits again slipped to SR26.1 billion in 2010 before bouncing up to SR30.9 billion in 2011, their highest level since 2006.

In the first 11 months of 2012, the total net profits of the 12 banks stood at around SR31.2 billion and experts believe the earnings could be equivalent to the 2006 record income of nearly SR34.6 billion.

“The strong performance of banks this year is mainly due to the expanding credit to the private sector, lower provision this year as well as low funding cost,” said Fahad Al Turki, senior economist at the Riyahd-based Jadwa Investments.

The income rise in 2011-2012 marked a return to profit growth by the banking sector in the largest Arab economy after a decline in the previous four years.

Saudi banks have the second largest asset base in the Arab region after UAE banks, with their combined assets standing at SR1,678 billion at the end of November, according to the Saudi Arabian Monetary Agency (SAMA).

SAMA’s figures showed domestic credit by Saudi banks has sharply recovered over the past two years, leaping year-on-year by nearly 15 per cent in the first 11 months of 2012 and 10.7 per cent in 2011. Lending grew by only about five per cent through 2010 while growth was negative in 2009.

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