SABB bank reports 20% fall in Q3 net profit

Q3 PROFITS: SABB's drop in quarterly earnings was twice as bad as analysts had predicted. (Getty Images)

SABB bank, HSBC's Saudi affiliate, reported on Tuesday a 20 percent fall in third-quarter net profit, which it said was due to its own "conservative" policy while deposits continued to slide.

SABB made SR570m ($152m) in the three months to September 30, it said in a statement.

The drop in SABB's quarterly earnings was twice as bad as analysts had predicted and is the sharpest fall of four listed Saudi banks that have announced their earnings so far.

"The decline in the profit... is mainly due to the bank's conservative policy," SABB said in the statement.

Several research reports said 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).

SABB made provisions for loan losses worth SR314.7m during the second quarter of this year which saw the bank's net profit fall 15 percent.

Like other Saudi lenders, SABB did not say whether it was exposed to Saad Group and Ahmad Hamad Algosaibi and Bros Company (AHAB).

Several research reports recently have said the profitability of Saudi banks will continue to be strained by provisions for possible loan losses linked to troubled conglomerates AHAB and Saad Group.

SABB's closest rival Banque Saudi Fransi reported a 1.9 percent drop in net profit for the third-quarter of this year.

SABB said its net operating income rose 10.7 percent to SR1.3bn after net income from lending rose 13.1 percent to SR854m.

This means that net income from non-lending operations rose 6.4 percent to SR450m.

Earnings per share were SR2.68, down from SR3.02 a year earlier.

Deposits stood at SR89.2bn by end-September against SR95.7bn a year earlier and SR91.5bn by end-June, 2009.

Also, compared to their level a year ago, loans fell by 5.7 percent to SR78.8bn while they rose slightly from SR78.7bn by end-June, 2009.

SABB shares are up 19.2 percent this year, underperforming both the all-share index and the banking industry's measure. (Reuters)

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READERS' COMMENTS

SABB gives in to spin doctoring to hide the slide
Posted by John, Dubai, UAE on Wednesday 14 October 2009 at 09:08 UAE time


Claiming its "conservative" policy is to blame for the dramatic slide in profits is SABB giving in to cheap spin. The fact is the bank never capitalised on its rebranding with the HSBC marque and never showed its stakeholders how they could benefit from the expensive process. The fact is was done to protect HSBC's interests has never been properly examined, but further slides in profit will make the Saudi majority shareholders less tolerant of the boys from London.

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