Saudi Arabia's banks reported a strong quarter of growth as the kingdom's infrastructure and housing projects boosted their profits.
Al Rajhi Bank, the kingdom's biggest lender, generated a net profit of 2 billion riyals (Dh1.95bn) for the second quarter, an increase of 13.5 per cent on last year's second quarter.
Saudi British Bank topped estimates with a profit of 915 million riyals for the second quarter, up 7.3 per cent from the same period last year, while Samba Financial Group generated a profit of 1.1bn riyals, an increase of 5 per cent.
Banque Saudi Fransi was alone among the big Saudi lenders in reporting a decline in profit, with income of 757m riyals for the second quarter reflecting a 2 per cent dip compared with the second quarter last year.
Saudi banks' cautious positions during the past few years had left them in good shape as government expenditure has increased and oil revenue has flooded corporate coffers, analysts from Standard Chartered wrote in a research report.
"Banks are not overleveraged and can increase the provision of credit at will. Robust economic activity driven by higher government spending is also maintaining healthy demand for credit," the report said.
Saudi Arabia is leading the Arabian Gulf in planned project spending this year, the report added. The kingdom announced a raft of housing and infrastructure development programmes after the regional unrest of the Arab Spring.
Banks were now finding it possible to expand profits because they remained relatively well cushioned by their deposit base.
Lenders such as Samba had found it possible to grow their loan books for four straight quarters, while operating costs including charges for bad debts had remained stable, said Naresh Bilandani, a financial analyst at JPMorgan, in a note to clients.
Standard Chartered has raised its growth forecasts for the kingdom to 5.1 per cent from an earlier estimate of 4.7 per cent for this year because of higher-than-estimated oil output during the first half.
In addition to higher-than-anticipated economic growth, the kingdom's banks are also poised to benefit from the approval of new mortgage laws, Fitch Ratings said on Tuesday.
The Saudi cabinet approved last week a new law allowing an Islamic property leasing system, with other measures enabling foreclosures.
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