Saudi banks up Q2 loan loss provisions

HIGHER PROVISIONS: Banque Saudi Fransi and Samba Financial Group book higher provisions amid concerns about fallout from debt restructuring at Algosaibi and Saad groups. (Getty Images)

Two large Saudi banks sharply increased second-quarter provisions for loan losses compared to a year ago, official data showed on Wednesday, amid concerns over the solvency of some debt-laden private Saudi firms.

Banque Saudi Fransi booked 120 million riyals ($32 million) in provisions for loan losses during the second quarter, according to data released on the Saudi bourse website.

Fransi's audited financial statements show it booked a little below 10 million riyals in provisions for loan losses in the same period of 2008, 46.1 million in the first quarter of 2009, and 287.5 million in the fourth quarter of 2008.

The Saudi affiliate of France's Calyon posted a 10.6 percent drop in second-quarter profit.

Samba Financial Group, the country's second-largest lender by market value, booked 97.3 million riyals in provisions for loan losses during the second quarter, against 37.8 million in the year-ago period, 203 million in the first quarter and 141.6 million in the fourth quarter of 2008.

Samba posted a 1.6 percent rise in second-quarter net profit.

SABB bank, HSBC's Saudi affiliate, indicated last week that it booked 129.7 million riyals in provisions for loan losses, down from 154 million riyals a year earlier, but up from 116.3 million riyals in the first quarter.

In recent weeks, several regional banks have given details of their exposure to debt-ridden Saudi conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros (AHAB).

But for a stock market as opaque as Saudi Arabia, it remains difficult to determine whether the level of provisions made by these banks is enough to cover their exposure to troubled family-owned firms such as Saad and AHAB.

Like the kingdom's central bank, Saudi banks refrained from making any statement about the two firms.

"The level of disclosure applied here doesn't make it certain that banks have provisioned well enough. Compared to other banks in the Gulf region, our banks are not as well provisioned," said Ibrahim al-Alwan, deputy head of KSB Capital.

Saad and AHAB are restructuring debt worth billions of dollars and a substantial chunk of it is owed to Saudi banks.

Earlier on Wednesday, Standard & Poor's said it found banks in Saudi Arabia and the UAE account for almost two-thirds of the total net exposure of 30 commercial banks it rates in the Gulf.

"Total exposure net of tangible collateral to the two groups (Saad and AHAB) is significant but manageable for sampled rated (Gulf) banks," said S&P credit analyst Goeksenin Karagoez.

Standard & Poor's said it had access to information related to the exposure of each Gulf bank but the data was confidential.

"Exposure to the groups varies significantly among the sampled GCC rated banks, from no exposure to net exposure of more than 20 percent of a few banks' adjusted total equity," the credit rating agency said. (Reuters)

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