Saudi banks record 37.5% profit rise in Q3

Saudi Arabia’s banks recorded a whopping 37.5 per cent increase in their net earnings in the third quarter of 2011 as they benefited from a surge in public spending and government contracts awarded in the first half.

The combined net profits of the Gulf kingdom’s 12 commercial bank stood at nearly SReight billion in the third quarter and the income is projected to remain high through the year, Saudi Arabia’s largest bank said.

In a study sent to 'Emirates24|7', National Commercial Bank (NCB) said all banks recorded gains, some with quadruple digit growth rates, except for Saudi Investment Bank, which suffered from a 9.7 per cent per cent due to lower fees income, which it said plunged by nearly 14 per cent in the third quarter.

“As we end the third quarter of 2011, banks have announced their profitability with exceptional performances,” the study said.

“We expect banks to continue growing their income levels as contract awards gained a staggering 156 per cent during the first half of 2011 Y/Y…this will provide ample financing opportunities as projects in infrastructure, power, and real estate will seek local lending.”

NCB’s figures showed the banks’ balance sheets maintained their growth, with their total assets expanding by nearly10.6 per cent Y/Y with NCB holding the biggest share at around SR307 billion.

Deposits continued to grow at a faster pace than loans validated by 3Q11’s 11.3 per cent and 9.7 per cent Y/Y, respectively.

This resulted in worsening the loans-to-deposits ratio which now stands at 75.4 per cent against 76.5 per cent during the same period last year.

“Since the beginning of 2011, Saudi banks have netted nearly SR24bn a 19 per cent increase over the same period of 2010,” NCB said.

“Saudi banks will need to continue deploying their liquid assets through the rest of 2011 and into 2012 in order to maintain their profitable momentum.”

Like in other Gulf oil producers, Saudi banks were hit by the 2008 global financial distress and debt default problems in the world’s dominant oil exporter.

The crises forced them to tighten lending to the domestic private sector and build up loan loss provisions, which affected their profitability.

Their balance sheets showed their consolidated net profits stood at around 26.1bn in 2010, slightly lower than the 2009 earnings of nearly SR26.8bn.

The profits totalled SR29.9bn in 2008 and peaked at SR30.2bn in 2007.

Besides expectations of lower provisions this year, experts believe the banks’ performance would improve because of higher economic growth, which is forecast at more than seven per cent in 2011. Another factor is a pick up in lending following a slowdown of nearly two years.

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