Better efficiency spawned by post-crisis risk-aversion policy boosted the combined net earnings of Saudi banks by around 18.4 per cent through 2011 and the income could see no major growth this year.
Despite the rise in net profits, the Gulf Kingdom’s financial sector in the main Saudi stock index lost 12.7 per cent in 2011, said National Commercial Bank (NCB), Saudi Arabia’s largest bank by assets.
However, the sub-index does not represent the performance of the banking industry as market players have been influenced by global sentiment and the common theme for the Saudi market, the herding mentality, to reap quick capital gains, NCB said in its weekly bulletin sent to Emirates 24/7.
Its figures showed the 12 locally incorporated banks recorded a staggering SR31.6 billion ($8.4 billion) in net profits in 2011, marking an 18.4 per cent increase over 2010 and one of their best financial years.
Core banking activities continued to gain on a moderate pace as net special commission income increased by 4.7 per cent on an annual basis.
“But profits were mainly due to higher efficiency levels driven by the risk averse stance of the banking system,” the report said.
As for balance sheet items, total assets expanded by 9.2 per cent Y/Y, adding a hefty SR126.5 billion over the financial year of 2011, it showed.
Loans portfolio growth has outpaced that of deposits as banks deployed their excess liquidity to grasp opportunities, the report said.
It showed banks provided SR854.5 billion in loans, an 11.6 per cent increase Y/Y, while deposits expanded by 10.7 per cent over the same period.
“We expect 2012 to be a moderate year for banks as they have optimized their assets very efficiently in 2011 leaving small room for further improvement….banks will need to expand their balance sheet items and focus on core activities to sustain growth rates amid suppressed market rates,” the report added.