Mixed earnings by Saudi banks amid declining deposit growth

19 January 2016

Most lenders stated profit increases despite falling deposits while some reported reduced income

Banks in Saudi Arabia have posted mixed results so far with most posting increased profits despite falling deposits and others reporting reduced income as provisions for credit losses bit into their profitability.

The fourth-quarter net profit for Riyad Bank fell 19.72 per cent to SR851m ($226.92m) from SR1.06bn for three months ending 31 December 2014. The full-year 2015 profit also slid 6.96 per cent to SR4.04bn.

Profit slumped as total operating income fell by about 4.4 per cent, mainly due to a decline in lower gains from non-trading investments, and reduced fees and commission income. An increase in total operating expenses by 12.5 per cent due to provision for credit losses and investments, also bit into profits, the bank said in a 19 January stock exchange filing.

The loans and advances portfolio at Riyad Bank grew by 8.38 per cent in 2015, however, customer deposits advanced only by 1.83 per cent.

Saudi British Bank (Saab) reported a 3.1 per cent decline in its fourth-quarter net profit, which slumped to SR939 from SR 969 for three-month period ending 31 December 2014.

The bank cited increases in provision for credit losses and rising salary and employee related expenses as the reasons for reduced profits. Total operating income recorded a fall of 0.9 per cent, which was due to decline in fees and commission income, the bank said in an 18 January statement on Saudi Arabia’s bourse website.

Saab also saw a mismatch in loans and deposits growth over the last year. Loans and advances grew rose by 8.86 per cent and deposits saw an increase of 1.9 per cent.

Alinma Bank, however said its profit for the full year and the fourth quarter 2015 rose in excess of 16 per cent. It recorded SR386m fourth-quarter profit, up from SR332m reported for the same period in 2014. The full year net income rose from 1.264 at the end of December 2014 to SR1.47bn for 2015, boosted by proceeds from financing and investments activities and fee from banking services and exchange related income, the bank said in 19 January statement.

Customers’ deposits outpaced the growth of Alinma’s loans and the advances portfolio in 2015. Deposits rose by 10.29 per cent while loans portfolio recorded an increase of 5.47 per cent.

Saudi Arabia’s National Commercial Bank (NCB), last week, saw its deposits fall by 3 per cent over the year, while loans continued to grow at 14 per cent. This kept net profit growth at 5 per cent year-on-year, to reach SR9.1bn.

Net profit for Banque Saudi Fransi reached SR950m with year-on-year growth of 14.8 per cent despite the more difficult economic conditions. Its total deposits fell 2.4 per cent while loans and advances grew at 5.9 per cent in 2015.

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