Saudi banks' profit drops 12.6% in October-November

Profits generated by Saudi commercial banks, including the 11 listed ones, fell 12.6 per cent in the October-November period, central bank data showed yesterday ahead of fourth quarter earnings announcements.

Excluding branches abroad, Saudi banks made a profit of SR3.94 billion (Dh3.85bn) during the period, according to the Saudi Arabian Monetary Agency's (Sama) website.

Sama did not indicate if the data related to net profit and described it only as cumulative profit. Saudi-listed firms were due to start publishing fourth-quarter earnings next month.

The Sama data showed that cumulative profit of Saudi banks stood at SR8.25bn in the first quarter of 2009, SR7.92bn in the second quarter and SR7.05bn during the third.

For the fourth quarter of last year, Saudi banks – including non-listed National Commercial Bank (NCB) – made a net profit of about SR4.4bn, according Sama.

Profits at most Saudi banks have come under pressure this year from exposure to some troubled Saudi conglomerates and also due to flat credit growth as lenders remained cautious about dealing with corporates because of the global slowdown.

Sama figures showed that the annual growth of Saudi money supply slowed slightly to 11.3 per cent in November, and foreign assets virtually stood still after showing the largest gains of the year in October.

Foreign assets controlled by Sama, the kingdom's central bank, increased by SR2 million and stood at SR1.427 trillion in November from a month earlier.

The kingdom posted an $8.8bn (Dh32.29bn) increase in foreign assets in October on the back of stronger crude prices, but has shed $54.1bn in foreign assets since November 2008 as it tries to counter the global economic downturn.

Money supply growth was 11.4 per cent in October. M3 money supply, the broadest measure, stood at SR1.023trn in November, according to a report posted on Sama's website.

Saudi Arabia, which filled its coffers with surplus income from oil exports this decade, has drawn on its reserves to fund record budgets and keep its $400bn five-year infrastructure development programme on track. While this spending drove the economy to grow 0.15 per cent in 2009, according to the kingdom's budget released last week, banks have remained hesitant to lend.

Lending to the private sector increased for the sixth consecutive month following a rate cut in June. Bank claims on the private sector rose around SR1.5bn to SR748.77bn in November from a month earlier, bringing the annual growth in credit down to less than one per cent, from 2.5 per cent in September.

During the boom years, bank claims on the private sector tripled between 2003 and 2008. The data released by Sama suggests that banks continue to hoard money at the kingdom's central bank and abroad. Commercial bank deposits at the central bank increased around SR3bn to SR141.4bn in November from a month earlier, despite earning just 0.25 per cent on their local deposits.

Foreign assets held by Saudi banks decreased marginally in November. Still, deposits in Saudi and abroad are double the level in November 2008.

Bank credit stood at SR723.4bn by end-November up from SR722.6bn in October and SR723.2bn a year earlier, data showed.

Saudi bank credit growth has been flat throughout much of 2009 as banks remained cautious about lending to corporates due to the slowdown and defaults by local and regional firms. Analysts have been expecting the pace of credit growth to pick up by year-end.

Credit growth picked up in August with a two per cent increase, before grinding to a halt in September.

Annual inflation reached a 28-month low of 3.5 per cent in October, but the government estimated inflation for 2009 to reach 4.4 per cent.

Analysts expect inflation to rise by end-2009 mainly due to a chronic housing shortage and weaker US dollar.

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