Profits at Saudi Arabia’s listed banks have risen in the third quarter as provisions fall and non-interest income rises.

The rise in profits is largely due to provisioning in the third quarter falling. For the 10 of the 11 listed banks that have reported financial results, provisioning fell from SR2.46bn ($656m) to SR1.345bn, a decline of about 45 per cent.

The latest figures indicate that in the third quarter, lending rose by 9 per cent compared with the same period of 2010 to SR680bn. The total volume of deposits also rose by 9.7 per cent to SR848bn. This has led to a slight increase in the loan-to-deposit rate, which is now at 80.7 per cent. The banks in Saudi Arabia remain liquid and are still in asset-building mode, despite the loan-to-deposit rate rising from 77.6 per cent in the second quarter of 2011.

Combined financial results of 10 Saudi banks ($bn)
  Second quarter 2011 Third quarter 2010 Third quarter 2011 Year on year change (%)
Operating income 3,063.50 2,956.40 3,077.70 4.1
Provisions 217.5 657 358.6 -45
Profit 1,791.80 1,333 1,698.20 27
Loans 174.8 166.4 181.4 9
Deposits 225.1 206.1 226.2 10
Loan/Deposit rate 77.6 80.7 80.2 -1
Assets 297.8 276 300.9 9
Source: NCB Capital

“We are still definitely trying to expand our asset book, but finding suitable good quality credits is tough,” says one banker in Riyadh. “When good deals come along, all the local banks are throwing large offers at them, but then we all get scaled back by the time the deal is closed.”

Credit growth is expected to average about 10 per cent by the end of the year, a significant improvement since 2009 when growth was flat, but still a long way off the heights of 2005-07, when growth was more than 20 per cent.

Total assets at 10 of the Saudi banks also rose by 9.2 per cent, hitting SR1,128bn. Non-interest income at the banks rose by 16.8 per cent, while special commission income dipped by 1 per cent.

Several banks reported huge increases in their profits compared to the same period of 2010, driven by lower provisions and rising non-interest income. Riyad Bank reported a particularly significant improvement in its performance, with profit rising by 30 per cent in the third quarter. Arab National Bank reported a 49.8 per cent rise in profits in the third quarter, although analysts at the local NCB Capital, the investment banking arm of National Commercial Bank, said this growth was lower than expected due to high provisioning at the bank. SABB, the local affiliate of the UK’s HSBC, reported a 50.4 per cent year-on-year growth in profits.

The banking index on the Saudi Stock Exchange (Tadawul) has risen marginally since the start of October, rising just 0.1 per cent. Although the results of the banks were positive, many analysts had been expecting a stronger pick up in profits.

The figures cover results released by Al-Rajhi, Arab National Bank, Banque Saudi Fransi, SABB, Saudi Investment Bank, Bank al-Jazira, Saudi Hollandi, Samba, Riyad Bank and Bank al-Bilad.