Lender misses analysts' forecasts after setting aside money to cover bad loans.
Saudi British Bank posted a 34 percent decline in second-quarter profit, missing analysts’ forecasts, as the lender 40 percent owned by HSBC Holdings set aside more money to cover bad loans.
Net income fell to SR447 million ($119.2 million) from SR676 million in the year-earlier period, the bank said in a statement on the Saudi bourse website on Monday. The average estimate of five analysts was for a profit of SR631 million, according to Bloomberg data
Profit at some Saudi banks suffered as they provisioned against bad loans since the onset of the global credit crisis and as lending slowed in the Arab world’s largest economy. Riyad Bank, the third largest in the kingdom by market value, Arab National Bank, and Saudi Investment Bank reported declines in second-quarter profit.
“We will have to look at it on a bank to bank basis,” Faisal Hasan, head of research at Global Investment House KSCC, said from Kuwait. “There are some banks that will still face provisioning.”
Banks in Saudi Arabia had been reluctant to resume lending even after the central bank cut interest rates and the government announced a $400 billion spending programme to restart the economy. Bank lending to the private sector increased an annual 3.9 percent in May, up from 2.4 percent in April, the Saudi Arabian Monetary Agency, the country’s central bank, said on its website last month.
Arab National Bank, Saudi Arabia’s sixth-largest publicly traded lender by assets, said second-quarter profit fell 16 percent to SR629 million, while Saudi Investment Bank said second-quarter profit fell 88 percent to SR22 million, according to the banks’ announcement on Monday to the Saudi bourse.
Saudi British Bank’s loans fell 5 percent to SR74.8 billion as of June 30, while customer deposits increased 3 percent to SR94.2 billion, the bank said. Operating income for the second dropped 1.7 percent to SR1.36 billion.
Saudi British Bank reported in April a 75 percent decline in provisions for bad loans to SR176.5 million in the three months ended March 31, from SR714.3 million in the previous quarter, according to data posted on the Saudi bourse website.
Saudi British declined 0.5 percent to SR43.7 on the Saudi stock exchange on Sunday, valuing the company at SR32.8 billion. The shares have gained 0.7 percent this year.