Saudi banks’ profits seen up 11% in 2012

Net earnings are expected to rise by 15% in 2013

Saudi Arabia’s banks are expected to record a decline in their profits in the fourth quarter of 2012 because of higher provisions but full-year earnings are projected to be higher by around 11 per cent, according to a Saudi newspaper.

A recovery in domestic credit along with strong economic performance and higher public spending will also boost the combined net income of the Gulf Kingdom’s 11 listed commercial banks by nearly 15 per cent in 2013, the Arabic language daily Aleqt said in a study, citing Saudi bankers and economist.

In the fourth quarter of 2012, Saudi banks’ profits are expected to fall by about five per cent because of higher bad loan provisions, the paper said.

Its figures showed provisions could leap by nearly 53 per cent to SR4.7 billion, almost equivalent to the total provisions taken through 2011.

“In 2012, the profits of Saudi banks are expected to rise by 11 per cent to SR28.44 billion and they are projected to increase by 15 per cent to SR32.7 billion in 2013 mainly due to an expected rise in lending to the real estate sector following the approval of the mortgage law in the Kingdom,” the study said.

The study apparently did not cover the profits of the country’s largest bank, National Commercial Bank (NCB), which is not listed on the bourse.

Figures by the Saudi Arabian Monetary Agency (SAMA), central bank, showed Saudi banks, including NCB, netted more than SR28 billion in the first 10 months of 2012 as lending continued to rebound following a downturn in the wake of the 2008 global fiscal distress and a debt default crisis in the Kingdom in 2009.

Releasing its monthly report this week, SAMA put the total net earnings of the banks at SR28.75 billion during the first 10 months of 2012, below the full year profits of SR30.9 in 2011 but above the 2010 net income of about SR26.1 billion.

Analysts said that in case banks earned SR six billion in the remaining two months of 2012, they could record their highest profits and bear the previous 2006 record income of more than SR34 billion.

SAMA’s figures showed banks’ claims on the private sector swelled year-on-year by about 14.6  per cent in October 2012 compared with 10.7 per cent in 2011 and only around 5.5 per cent in 2010. Credit growth was negative in 2009.

Recovering credit allied with higher commission and investment return to boost Saudi banks’ net profits by nearly 18 per cent to around SR30.9 billion in 2011 from nearly SR26.1 billion in 2010.

The surge marked a return to profit growth by the banking sector in the largest Arab economy after a decline in the previous four years.

Saudi Arabia’s banks netted their highest profits of SR34.6 billion in 2006 before the income slumped to SR30.2 billion in 2007.

 

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