Saudi Investment Bank Q3 net profit triples

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Saudi Investment Bank (SAIB), which received two rating downgrades in June, said on Monday its net profit more than tripled during the third quarter despite a drop in net operating income.

The lender said it made 203 million riyals ($54 million) in the three months to Sept. 30.

SAIB's earnings performance during the third quarter was the best by any Saudi lender this year amid fears the profitability of Saudi banks will continue to be strained by provisions for possible loan losses linked to troubled conglomerates Saad Group and Ahmad Hamad Algosaibi and Bros Company (AHAB).

Net income from operations over the third quarter decreased by 10.8 percent to 370 million riyals, it added. Net lending income, a key component of net income from operations, rose 8.1 percent to 240 million riyals, SAIB said.

This means that net income from non-lending operations such as foreign exchange and brokerage fees fell 32.6 percent to about 130 million riyals, based on Reuters calculations.

SAIB said however that its deposits at the end of September fell 10.7 percent from a year earlier to 38.41 billion riyals, although this marked an improvement on the 36.36 billion riyals it had by end-June, 2009.

Hesham Abu Jamea, head of asset management at Bakheet Investment Group, said SAIB's third quarter net profit came close to his 190 million riyals forecast.

"The improvement in SAIB's net profit during the third quarter was expected because they needed less provisions, especially for investments abroad compared to the same period in 2008 after the recent improvement in international markets," he told Reuters.

Last year, SAIB booked about 968 million riyals in provisions to cover losses on investments, leading it to post its lowest net profit in at least four years.

"SAIB will also need to make less provisions for bad loans during the third quarter after they booked some 55 million riyals for the second quarter of 2009," Abu Jamea added.

Bakheet Investment Group expects SAIB to post a net profit of 208 million riyals during the fourth quarter of 2009 compared with a net loss of 90.7 million riyals for the same period of 2008, Abu Jamea said.

SAIB did not give details about the level of provisions at the end of September. It said that a 4 percent annual rise in its net profit during the nine-month period to end-September stemmed from "return on investments and an improvement in the retrun on assets ratio".

The loans portfolio stood at 30.53 billion riyals by end-September against 29.87 billion riyals a year earlier and 30.15 billion riyals by end-June, 2009.

Fitch has downgraded SAIB's individual rating to 'C/D' from 'C' citing "concerns about SAIB's asset quality, particularly because of its high borrower concentrations in a slowing economy".

Standard & Poor's on June 2 revised its outlook on SAIB to negative from stable to reflect "a weakening in the bank's profitability as well as potential deterioration of its financial profile that could result from an increase in nonperforming loans and provisioning needs".

According to Saudi bourse data, JP Morgan International Finance Ltd holds a 7.4 percent stake in SAIB which in turn holds a 50 percent stake in American Express Saudi affiliate. (Reuters)

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