Saudi Arabia’s banks are posting improved third-quarter profits, compared with the same quarter last year, as the kingdom’s banking market continues to strengthen.

However, some lenders have seen a slight dip in results, compared with the preceding quarter.

Out of the banks that have announced their results so far, Riyad Bank has recorded the highest level of profits, with SR1.1bn ($266.5m), marking an 8 per cent increase in net profit, compared with the same quarter last year.

However, the lender recorded a 5.3 per cent decline in profits, compared with the preceding quarter.

Banque Saudi Fransi posted the fastest growth in profits, recording a hike of 35 per cent for the third quarter, compared with the same period in 2013.  The bank’s profits stood at SR926m at the end of September this year.

So far, Al-Jazira Bank has posted the biggest decline in profits, falling by 75.1 per cent in the third quarter, compared with the same quarter last year.

The general upward trend in results suggests the Saudi bank market is still highly liquid and in growth mode. The sector has benefited from reduced provisioning costs and low impairment charges this year, which has further bolstered results.

Increasing lending activity has also underpinned the improvement in results, especially as margins are fairly tight in the Saudi market. Banks are under pressure to do more business to compensate for low margins of individual deals.

Banque Saudi Fransi reported a 5 per cent increase in its loans and advances portfolio for the first nine months of 2014, compared with the same period last year. Likewise, Riyad Bank reported an increase in loans of 8.1 per cent during the first nine months of the year.

Saudi Hollandi Bank reported a far faster rate of growth, with its loans book rising by 19 per cent in the third quarter.

Customer deposits are also growing roughly in line with the individual banks’ growth in lending. 

Analysts continue to forecast an annual lending growth rate of about 10 per cent for the coming year in Saudi Arabia, with strong competition continuing to place pressure on margins.

The banks are releasing their results just ahead of the launch of National Commercial Bank’s (NCB’s) much-awaited initial public offering (IPO). The bank is the largest in the kingdom and the last remaining unlisted Saudi lender. It aims to raise SR22.5bn by listing on the Saudi Stock Exchange (Tadawul).

The listing of NCB could further heighten competition in the bank market as well as bolster investor interest in the wider highly liquid and profitable sector.