Banks seen raising provisions on Saudi groups - NCB

DEBT FALLOUT: Jeddah-based National Commercial Bank sees further writedowns in banking sector in response to turmoil at Saad and Algosaibi groups, but doesn't view it as threatening. (Getty Images)

Saudi and Gulf banks may increase provisions towards the end of the year but levels will not be threatening, the chief economist of Saudi state-owned National Commercial Bank (NCB) said on Monday.

Banks in the Gulf region have taken provisions after troubled Saudi conglomerates Saad Group and Ahmad Hamad Algosaibi & Brothers said they would restructure debt.

A number of Gulf Arab banks have said they face potential writedowns on loans made to the two groups with HSBC estimating the lending exposure of Saudi banks alone at $4-$7 billion.

"It does not seem that there is a phenomenon among the business sector, especially taking into account business houses, of an inability to cover their credit," said Said al-Shaikh, chief economist at NCB, the country's biggest bank by assets.

"I believe what happened is limited to certain houses and some businesses, so I do not imagine that the size of these provisions would reach to levels that are harmful to banks in a large degree," he told reporters.

In neighbouring UAE, the central bank instructed local banks to boost their provisions against their exposure to Saad and Algosaibi by 75 percent and 50 percent respectively, in a private meeting, bankers told Reuters last week. (Reuters)

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