x Abu Dhabi, UAEFriday 28 July 2017

Lending slowdown, provisions hit Saudi banks

Three Saudi banks posted fourth-quarter earnings below forecasts, hit by a slowdown in lending growth and higher provisions.

RIYADH // Three Saudi banks posted fourth-quarter earnings below forecasts, hit by a slowdown in lending growth and higher provisions, with Saudi Hollandi Bank making its first quarterly loss in two years. The earnings could reignite investor fears over the impact of the global crisis and a multibillion dollar default by two family-owned businesses although local officials said the Saudi financial system has withstood these with little damage.

Saudi banks also bore the brunt of a slowdown in lending in 2009 after years of fast credit growth that brought the domestic banking system to its limits. Both Hollandi and Banque Saudi Fransi ? which reported its lowest quarterly net profit in at least five years ? blamed provisions for poor earnings in 2009. Samba Financial Group, the second biggest Saudi lender by market value, was the only lender to record a small rise in net profit but was still below the lowest forecast in a Reuters poll.

Hollandi, partly owned by Royal Bank of Scotland, said on Sunday it made a net loss of 439.4 million riyals ($117 million) in the three months to end-December, having made a net profit of 309 million a year earlier. It was the first quarterly loss by Hollandi since the fourth quarter of 2007 when it lost 106.3 million riyals. For 2009, Hollandi made a net profit of 85.9 million riyals, down from 1.22 billion in 2008.

"The decline in net profit is mainly due to the bank's conservative policy aimed at continuing to boost provisions," Hollandi said, adding its loans portfolio fell 6 per cent by the end of 2009 while deposits rose 4 per cent. Saudi Fransi, 31.1 per cent owned by French bank Credit Agricole, said fourth-quarter net profit fell 43.3 per cent after it booked provisions to support its finances. Fransi made 324 million riyals, almost half the lowest forecast in a poll.

It was Fransi's lowest quarterly net profit since at least the fourth quarter of 2004 when it made a net profit of 374 million riyals, according to Reuters data. For 2009, Fransi made a net profit of 2.47 billion riyals, also the lowest since 2005. "The decline in earnings is due to the volume of provisions that were made during that year (2009) to continue supporting the bank's financial position," Fransi said.

Fransi said its loans portfolio fell 3.7 per cent by the end of 2009 while deposits slid 2.2 per cent. Samba saw its net profit inching up 1.1 per cent year-on-year in the fourth quarter, but was still below all forecasts. It made 835 million riyals, the lowest quarterly profit in a year. Samba said its loans portfolio fell 14 per cent by the end of 2009 to 84 billion riyals while deposits rose 10 per cent to 147 billion.

*Reuters