Saudi lenders press on with loans clean-up

Saudi lenders press on with loans clean-up

Saudi Investment Bank more than quadruples same provisions.

July 31, 2010 2:36 by Reuters

Three Saudi lenders have booked provisions for loan losses during the second quarter, as the Saudi banking sector pushes on with a clean-up loan portfolios hit by defaults of local firms.

Samba Financial Group, the kingdom’s second-biggest lender by market value, booked 57.4 million Saudi riyals ($15.31 million) for loan losses during the second quarter, down from 97.9 million riyals a year earlier, bourse data showed on Saturday.

Samba’s net profit fell 1.9 percent in second-quarter net profit due mainly to a decline in income from lending.

The much-smaller Saudi Investment Bank <1030.SE> meanwhile more than quadrupled these provisions compared to a year earlier to 300 million riyals. The lender reported an 88 percent fall in its net profit for the same period.

Samba was one of only a few Saudi banks that at the end of 2009 booked provisions higher than their non-performing loans.

Unlisted and state-owned National Commercial Bank (NCB), the kingdom’s biggest lender by assets, raised its provisions for loan loss by 44 percent during the second quarter to 613 million riyals, according to financial statements published in Saudi newspapers.

NCB’s second-quarter profit rose 3.4 percent.

Saudi lenders had a difficult year in 2009 when profitability was eroded by provisions for non-performing loans. These provisions doubled compared to previous year to almost 11 billion riyals as a number of Saudi and regional firms ran into financial problems.

Provisions for loan losses rose to 1.5 percent of total bank credit in 2009, up from 0.67 percent in 2008. Non-performing loans surged to more than 3 percent of total bank credit in 2009, almost double their level in 2008.

Several Saudi banks saw lower profits during the first half of the year as credit growth struggled to recover after a lending spree during 2004-2008 period that was buoyed by a surge in the kingdom’s oil revenues.

The growth of Saudi bank credit, especially to the private sector, was flat throughout much of 2009 due to the global slump and after defaults by local family firms.

(Reporting by Souhail Karam; Editing by Raissa Kasolowsky)