Saudi banks report fall in third quarter profit due to higher provisioning

17 October 2010

Alinma Bank records steepest fall of 49 per cent

Saudi Arabian banks have reported a drop in annualised third quarter profits as a result of higher provisions, lower lending incomes and troubled family-owned firms.

Alinma Bank recorded the sharpest decline of 49 per cent, followed by Saudi Hollandi Bank which posted a fall of 43 per cent.

National Commercial Bank (NCB) the country’s largest bank in terms of assets, suffered a 19 per cent drop in third quarter profit, announcing a net profit of SR3.5bn ($5bn) in the nine month period to end-September 2010.

Others with disappointing results include Riyad Bank with a 20 per cent drop and Samba Financial Group with an 8.8 per cent drop in profit in the three months to the end of September 2010.

The pressure to increase provisions for non-performing loans (NPLs) has significantly eroded margins.

For example, the kingdom’s biggest Islamic lender, Al-Rajhi Bank, almost doubled provisions during the third quarter to cover 122 per cent of its total non-performing loans (NPLs). It posted an 8.6 per cent drop in profit for the third quarter.

The need for increased provisioning has been blamed on lower lending incomes and debt defaults by family-owned firms

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