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Wed 13 Jan 2010 10:24 PM

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SABB's profits slashed due to new provisions

Low earnings reignite fears amongst traders about the impact of the global financial crisis.

New provisions all but wiped out earnings at SABB bank on Wednesday, dragging net profit to its lowest quarterly level in more than a decade.In a reminder of the pain inflicted on Saudi lenders by the global financial crisis, HSBC's Saudi affiliate reported a 96 percent fall in fourth quarter profit.

It followed a string of Saudi banks hit by extra provisions and a lending slowdown.

Saudi banks more than tripled provisions against loan losses over the first nine months of 2009 to $1.61 billion.

Riyad Bank, along with SABB one of Saudi Arabia's top five lenders by market value and assets, bucked the trend with a better than expected 72.4 percent rise in fourth quarter net profit.

SABB's earnings reignited fears about the impact of the global crisis and a multi billion dollar default by two family owned businesses although state officials have said the Saudi financial system has withstood these with little damage.

SABB, in which HSBC holds a 40 percent stake, posted net profit of $6.93 million compared with the most conservative forecast in a Reuters survey of $150.4 million.

For all of 2009, the bank made a net profit of $541.20 million, its lowest in five years. Earnings per share fell to $0.72 down from $1.03 in 2008 after adjustment for a 25 percent bonus share issue made last year.

Managing director, Richard Groves said: "The decreased net profits compared to the net profits of (2008) are mainly due to the increase in the provisions in line with SABB's continued conservative policy to enhance its financial position."

The bank did not specify what these provisions were for.

But it posted a near-20 percent fall in the value of its investments by the end of 2009 - a net drop of $1.54 billion - and a 4.7 percent decline in loans.

SABB's spokesman Ibrahim Abomouti declined to comment.

Over the first nine months of 2009, SABB made provisions for loan losses worth $208.55 million, almost three times the level from a year earlier.

Riyad Bank posted profit of $243.16 million from $141.04 million a year earlier, above the $230.36 million expected by the most optimistic analyst in a Reuters survey.

For all of 2009, the bank's net profit rose 14.8 percent to a record $807.89 million or $0.53 per share against $0.54 in 2008, adjusted for a capital hike last year.

Riyad's loans rose 10.5 percent in 2009 to $28.52 billion but the value of its investments fell by almost 20 percent in 2009 - or $2.13 billion, it said.

Income from special fees - the equivalent of net income from lending - increased 9.5 percent in the fourth quarter to $282.62 billion and by 10.1 percent in all of 2009 to $1.15 billion riyals.

The much smaller Albilad Bank also blamed provisions for a near 10 fold rise in its fourth quarter net loss to $79.85 million, its worst quarterly earnings since its was launched in 2004.

For all of 2009, the Islamic lender made a net loss of $66.1 million - or a net loss of $0.22 per share - against a net profit of $33.32 million in 2008. (Reuters)

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