NCB’s strong performance comes on the back of a period of extensive restructuring. The next stage in the bank’s rehabilitation will be the release of full financial accounts for 1999-2001. This in turn will pave the way for an offering of some state-held shares in a public offering. The remaining holdings of the Bin Mahfouz family are also understood to have been sold.

While most banks produced strong profit performances, aggregate growth was brought down by Saudi American Bank (Samba)and Al-Rajhi Banking & Investment Corporation– historically the sector’s outperformers – which saw net earnings contract by 15 per cent and 22 per cent respectively. Samba attributed the profit drop to increased provisioning. Despite a decline in net interest income, Samba’s core operating income has remained flat at SR 1,540 million ($411 million). Al-Rajhi has seen a sharp decline in returns from foreign investments since the beginning of the year.

Although the banking sector is expected to see margins come down as a result of lower interest rates, its long-term prospects have been boosted by a pick-up in loan demand, with most Saudi banks enjoying an improvement in their loan/deposit ratios (MEED 19:7:02).