Saudi lender Riyad Bank posted a lower than expected 55 percent rise in net profit during the first quarter after a drop in lending income offset a near 23 percent fall in operating costs.
Saudi Arabia's third largest lender by market value made a $182.4 million net profit in the three months to end-March, up from $117.5 million in the year earlier period, it said in a statement on Sunday.
This came below the least optimistic of four forecasts in a Reuters survey earlier this month.
Mohammed Ishaq Ali, a fund manager at al Rajhi Capital in Riyadh said Saudi banks were cautious since the global turmoil as well as the debt problems at Dubai state firms.
Without giving any details, the Riyadh based bank said: "A good rise in banking services income in addition to cuts in operating costs contributed to the profit gain."
Income from banking services - brokerage, investment and foreign exchange operations - rose by almost 32 percent to $121.8 million during the first quarter, based on Reuters calculations.
Net income from special fees or lending income fell 9 percent to $293.3 million, Riyad said.
Riyad's loans rose 6.1 percent to $28.3 billion while deposits rose 7.5 percent to $34.1 billion by the end of March.
Operating income remained almost unchanged at about $399.9 million. This means that operating costs fell to $209.3 million from $266.6 million in the first quarter of 2009, based on Reuters calculations.
In addition to salaries, operating costs include provisions for non performing loans and investments.
The bank made no mention of the size of provisions for non performing loans it had to make during the first quarter of 2010 and which stood at $196.3 million in 2009, down from $139.5 million in 2008.
Profits at most Saudi banks have come under pressure in 2009 from provisions to counter exposure to some troubled Saudi firms and also to flat credit growth as lenders remained cautious about dealing with companies due to the global slowdown.
Last year's financial statements for Riyad Bank showed it was among some of the Saudi lenders to have made less provisions than their total non-performing loans.
Unlike many overseas peers, Saudi banks have not disclosed their exposure to troubled family owned Saudi conglomerates.
Shares in Riyad have so far gained 15.2 percent this year outperforming both the Saudi bourse's all share index and the banking stocks index.
Earnings per share rose to $0.12 in the quarter from $0.07 a year earlier.
Riyad Bank is the first major Saudi lender to report quarterly results.
Al Rajhi's Ali is upbeat about more banking earnings despite the bank missing forecasts.
He said: "Riyad Bank's quarterly earnings have further strengthened the underlying tone in the market that the sector is likely to declare good results." (Reuters)