Saudi banks net SR15.7 bn in first half

Saudi Arabia’s banks earned nearly SR15.72 billion in the first half of 2011 and the annual profits are expected to be higher than in 2010 because of credit recovery and lower provisions, according to official data.

The Gulf kingdom’s 12 commercial banks netted nearly SR2.6 billion in June alone and around SR2.9 billion in May, bring their total second quarter net income to about SR8.1 billion, higher than their first quarter profits of SR7.6 billion, the Saudi Arabian Monetary Agency (WAMA) said in its monthly report.

The report covered all banks in the world’s top oil supplier, including the non-listed National Commercial Bank (NCB), the country’s largest bank.

SAMA gave no figures for the first half of 2010 but the banks’ net profits for the whole year stood at SR26.1 billion, slightly lower than their net earnings of SR26.8 billion in 2009. Profits stood at nearly SR29.9 billion in 2008, around SR30.2 billion in 2007 and a record high of SR34.6 billion in 2006.

Profits of listed banks in the Kingdom, the largest Arab economy, swelled by 10.8 per cent to SR12.9 billion from SR11.68 billion in the first half of 2010.

The earnings did not include those of NCB and Aljazira Bank, which has not yet published first half result. Operating income of the 10 banks grew by 2.18 per cent to SR22.6 billion from SR22.12 billion while commission earnings slipped by 0.09 per cent to SR15.52 billion from SR15.53 billion in the same period.

Quoting analysts in the Kingdom, the Saudi daily Aleqtisadiah said the increase in the net profits of the banks was a result of a sharp decline in NPL provisions by some banks and the absence of any such allocations by other banks.

Like in other Gulf oil producers, banks in Saudi Arabia have been jolted by the 2008 global fiscal distress and regional debt default problems.

The crises prompted most banks to step up bad debt provisioning at the expense of their net earnings, reversing years of high profits during the oil boom before the 2008 turmoil. But many banks have started to recover as they cut provisions and gradually relax curbs on domestic credit.

 “Overall, the Saudi banking system remains profitable with plenty of room to grow. As the global risk averseness continues to diminish, Saudi banks cautiously follow suit and deem eventually to expand their loans portfolios….with

over SRone trillion deposits on balance sheets, and a range of lending opportunities in an expanding economy, banks are set for a profitable year in 2011,” NCB said in a recent study on the Gulf Kigndom’s banking sector, the second largest in the Arab world after the UAE banks.

“Furthermore, massive government spending supported by the recent royal decrees will provide the stimuli for this growth.”

The study showed last year’s provisions by Saudi banks were due to loans portfolios, albeit to a slightly lesser scale compared with 2009. Total provisions stood at SR9.9 billion in 2010, nearly SR1.3 billion less than 2009.

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