Although it has only released headline figures, the commanding performance came from TheNational Commercial Bank (NCB), the largest bank in the country in terms of assets. NCB grew its net profits by 48.6 per cent to SR 1,403 million ($374 million) in the first half, establishing itself as the most profitable bank in Saudi Arabia, by some margin. The full state of NCB's financial health has been obscured by a protracted period in which no audited results have been published. It is expected that ongoing negotiations among the bank's shareholders will further delay the publishing of full financial statements, and this in turn will delay any planned listing of NCB's shares on the Saudi stock market (MEED 3:5:02, Cover Story).

Among the quoted banks, the best performance came from Arab National Bank (ANB), which grew its net by almost 29 per cent to SR 302 million ($81 million) in the first six months. Al-Bank Al-Saudi Al-Fransi (BSF)and Saudi Investment Bank (SAIB)were not far behind, generating earnings growth of 25.6 per cent and 21.5 per cent respectively.

All of the other banks bar two reported profit growth in excess of 9 per cent. The two exceptions are historically the sector's outperformers. Saudi American Bank (Samba) saw its net earnings contract 13.1 per cent and Al-Rajhi Banking & Investment Corporation saw its net fall 31 per cent. For Samba, a decline in net interest income - which is understood to be partly the result of the forced repricing of its fixed-income portfolio - was the main culprit. Al-Rajhi blamed a sharp decline in the returns from foreign investments for its plummeting profits.

All banks will be eyeing interest rates for the rest of the year and the impact on net interest income is expected to filter through to the bottom line in the third and fourth quarters as hedging positions unwind.

However, long-term prospects have been boosted by an apparent pick-up in loan demand. The firming of credit appetite over the last 12 months is clearly visible in the banks' aggressive balance sheets: all but Bank al-Jazira, the minnow of the sector, have seen their loans-deposits ratio grow. With declining provisioning levels at most banks suggesting the increase is not going hand-in-hand with deteriorating asset quality, it would seem that strong foundations are being laid for future growth.