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Saudi bank lending provisions shrink

JEDDAH - 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 multi-billion 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.

"This is an embarrassing and surprising set of results. Investors will not like it and we will most likely see banking stocks going limit down tomorrow," said Hesham Abu Jamea, head of asset management at Bakheet Investment Group.

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.

Banque Saudi Fransi has announced its financial results for 2009, recording a net income of SR2.47 billion compared with SR2.81 billion earned in 2008, the bank said in a statement.

Although the bank's fundamentals remain sound, the decrease was primarily due to the combination of market conditions, lack of volatility and slow activity on the stock market.

Moreover, the board of directors, taking into account these factors, moved on with a prudent provisioning policy which explains why the net income during the last quarter of 2009 was SR324 million against SR571 million for the corresponding quarter of the previous year. The earnings per share establish at SR3.42 for the full year 2009 against SR3.88 for 2008.

Abu Jamea said Hollandi and Fransi appear to have made provisions for loan losses during the fourth quarter worth $200 million and $100 million respectively. "The decline in net profit is mainly due to the bank's conservative policy aimed at continuing to boost provisions."

Hollandi said it made a net loss of SR439.4 million ($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 SR106.3 million.

Fransi said its loans portfolio fell 3.7 percent by the end of 2009 while deposits slid 2.2 percent.

Al-Jazira Bank also widened its losses for the fourth quarter by 189 percent while Arab National Bank 's net profit fell 31.8 percent.

Al-Jazira Bank said it posted a net loss of SR266 million ($70.93 million) in the fourth quarter, up from a loss of SR92 million in the same quarter a year ago, according to a statement posted on the bourse website.

Arab National Bank posted SR296 million in net profits compared to SR434 million during the same period a year earlier.

However, Samba saw its net profit inching up 1.1 percent year-on-year in the fourth quarter, but was still below all forecasts. It made SR835 million, the lowest quarterly profit in a year.

Samba said its loans portfolio fell 14 percent by the end of 2009 to SR84 billion while deposits rose 10 percent to SR147 billion.

© The Saudi Gazette 2010