Saudi banks’ profits up 12.4% in 9 months

An upturn in the domestic economy allied with an increase in credit boosted the net profits of Saudi Arabia’s banks by nearly 12.4 per cent in the first nine months of 2012 and they are expected to record one of their best periods through the year.

From around SR24 billion (Dh23.7 billion) in the first nine months of 2011, the net income of the Gulf Kingdom’s 12 banks swelled to nearly
SR27 billion (Dh26.6 billion) in the first nine months of 2012, their balance sheets showed.

Al Rajhi Bank, one of the largest financial units in the Middle East, emerged as the biggest earner, netting nearly SR5.97 billion in the first nine months of 2012 compared with about SR5.47 billion in the first nine months of 2011.

National Commercial Bank (NCB), the region’s largest bank by assets, came second in terms of net earnings which rose to SR5.04 billion from
SR4.47 billion.

The Saudi American Bank Group (SAMBA) was the third largest earner with its profits growing to SR3.46 billion from SR3.36 billion. It was followed by Riyadh Bank, whose net income increased to SR2.65 billion from SR2.37 billion.

Analysts said growth in net profits was a result of 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 credit followed a sharp slowdown in previous years in the wake of the 2008 global fiscal distress and debt default 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 and the second highest in banks’ history.

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.

The Kingdom’s real GDP, the largest in the Arab world, recorded one of its highest growth rates of 6.8 per cent in 2011 and is projected to swell by 5.3 per cent in 2012 because of strong oil prices, higher crude output and expansion in most non-oil sectors.

In a study last week, NCB said the rise in banks’ lending boosted the loans-to-deposits ratio to its highest level in nearly three years, adding that this will positively affect the banks’ performance through 2012.

“The pickup in lending has outpaced the flow of deposits which led to the improvement

in the loans-to-deposits ratio to reach 83.2 per cent, the highest since April 2009. This will support banks in growing their profit levels which have already made a strong recovery from the financial crisis.”

 

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