SAAB leads surge in Saudi bank bad debts

SABB led a surge in problem debts at Saudi banks on Wednesday with a 16 fold increase in non performing loans (NPL) to $940.3 million at the end of 2009.

Financial statements showed SABB's NPLs rising from $51.65 million at the end of 2008. This means that non performing loans accounted for 4.6 percent of SABB's total loans in 2009, up from near zero percent in 2008.

SABB, 40 percent owned by HSBC, had provisions to cover half of them. At the end of 2009 the lender had provisions against loan losses of $474.6 million, up from $167.86 million a year earlier, the statements added.

Its shares closed 4.95 percent lower.

Hesham Abu Jamea, head of asset management, Bakheet Investment Group, said: "SABB is leaving the decision to make more provisions for these loans to 2010."

He added: "It did not fully provision them in 2009 because doing so would have had a massive impact on its (2009) earnings."

SABB last month posted a net profit for 2009 of $541.8 million, down 30.4 percent on the previous year.

Abu Jamea said: "The fact that the bank declares these loans to be non-performing does not mean they have to be or were written down as lost forever. Their situation can change but we will not know this until the end of 2010."

SABB spokesman Ibrahim Aboumouti declined to comment.

He said: "Nobody at SABB is available for comment."

Financial statements for Riyad Bank, Arab National Bank (ANB), Al Jazira Bank and Saudi Investment Bank also showed they have made less provisions than their total non performing loans.

Riyad's non performing loans inched down to $333.3 million in 2009 from $338.65 million while impairment charges for loan losses rose to $184.95 million in 2009 from $160.74 million in 2008.

Al Jazira's bad loans surged to $325.32 million in 2009 from $62.10 million 2008 while provisions for loan losses rose to $211.6 million from $101.7 million.

Saudi Investment Bank's non performing loans soared to $477.32 million versus $78.6 million in 2008 while provisions stood at $333.32 million in 2009 up from $198.1 million in 2008.

ANB, affiliated to Arab bank, said its non performing loans jumped to $511.98 million from $78.9 million in 2008. ANB's provisions for loan losses rose by 41.7 percent to $389.3 million.

Because of limited transparency in the Saudi financial market, it was not clear where this increase in non-performing loans specifically stemmed from.

Bakheet's Abu Jamea said: "The majority of these non-performing loans are the result of debt defaults by Saudi firms, many of which are family owned, after the crisis."

Unlike peers in many countries in the world, Saudi banks have not disclosed the level of their exposure to troubled family owned Saudi conglomerates.

Best covered lenders were Islamic lender Al Rajhi Bank, Banque Saudi Fransi and Saudi Hollandi Bank.

Hollandi, affiliated to Royal Bank of Scotland, nearly doubled provisions in 2009 to $599.9 million to cover $597.3 million in non performing loans, which rose 109.3 percent in 2009.

Fransi, affiliated to Credit Agricole, raised provisions by 51 percent to $341.32 million in 2009 to cover bad loans which rose 32.2 percent to $269.32 million.

Rajhi said financing whose value declined - the term it uses to refer to bad loans - rose to $1.03 billion in 2009 versus $738.6 million in 2008. Provisions in the meantime rose to $1.17 billion in 2009 versus $1.05 billion in 2008. (Reuters)