x Abu Dhabi, UAETuesday 16 January 2018

Saudi lenders book more bad loan provisions

Saudi banks secrecy regarding exposure to two troubled private firms kept investors guessing about their adequacy.

RIYADH // Saudi banks booked more provisions for bad loans during the latest quarter, but their secrecy regarding exposure to two troubled private firms kept investors guessing about their adequacy. Stock exchange data showed that five Saudi banks booked more provisions for loan losses in the third quarter, an increase of at least 183 per cent to their total amount this year compared to the first nine months of last year.

The provisions had been widely expected amid concerns over the solvency levels of the heavily indebted family conglomerates Saad Group and Ahmad Hamad Al Gosaibi and Brothers, which were at the centre of an estimated US$22 billion (Dh80.78bn) debt implosion. Unlike their peers in the region, Saudi banks have not disclosed their exposure to these two firms and this has kept analysts wondering whether any newly booked provisions would be high enough to fully cushion them against anticipated losses.

"We don't have a clear idea about exposure - If you don't know the level of exposure, then it will be difficult to say if these provisions are enough," said Ibrahim al Alwan, the deputy chief executive of KSB Capital. Standard & Poor's said banks in Saudi Arabia and the UAE accounted for almost two thirds of the total net exposure to the conglomerates of the 30 commercial banks that it rates in the Gulf.

A Saudi government panel last month brokered a deal between the Saad Group and Saudi lenders, but neither party disclosed the details of the agreement, which added further mystery to its significance for holders of Saudi banking shares. "Officials say banks are well covered," Mr al Alwan said. "Banks here are generally conservative when it comes to lending and provisions, but they are not transparent enough".

SABB, the Saudi affiliate bank of HSBC, booked 351.5 million riyals (Dh344.1m) in provisions for bad loans during the third quarter compared to 314.4m riyals booked during the previous quarter, bourse data showed on Saturday. This brought to 782.2m riyals SABB's total provisions made over the nine months to the end of September. In comparison, Riyad Bank put aside 601.8m riyals in the same period.

The Samba Financial Group, the second-biggest Saudi lender by market value, took provisions of 377.2m riyals compared with 127.6m in the same period a year earlier, while the Banque Saudi Fransi, the Saudi affiliate of the French investment bank Calyon, booked 223.5m riyals. * Reuters