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Tue 27 Jul 2010 05:27 PM

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Saudi SABB, Riyadh banks hike Q2 provisions for loans

HSBC's Saudi affiliate SABB bank books SR504m ($134.4m) for loan losses during Q2.

Saudi SABB, Riyadh banks hike Q2 provisions for loans
(Getty Images)

Saudi based banks SABB and Riyad sharply raised provisions for loan losses during the second quarter, pressing on with a clean up of their loan portfolios after defaults by some local firms.

Riyad raised provisions for loan losses by 105.4 percent to $52.3 million during the second quarter while SABB booked $134.3 million for the same purpose, more than 60 percent above the year earlier period, stock exchange data showed on Tuesday.

HSBC holds a 40 percent stake in SABB.

During the first quarter, Riyad booked loan provisions worth $51.7 million while SABB's stood at $47 million.

Riyad saw its net profit fall 16.5 percent in the second quarter while SABB's fell 34 percent.

Saudi lenders had a difficult year in 2009 with profitability eroded by a doubling of provisions for non performing loans to almost $2.93 billion as a rising number of Saudi and regional firms ran into financial problems.

Several Saudi banks continued to see lower profits during the first half as credit growth struggled to recover after a lending spree over the 2004-2008 period that was buoyed by a surge in the kingdom's oil receipts.

The growth of Saudi bank credit, especially to the private sector, was flat throughout much of 2009 due to the global slump and after defaults by local family firms.

Shares in SABB are up 2.5 percent this year while Riyad is up 7.8 percent. The banking stocks index has gained 7.1 percent this year, against a 2.5 percent rise in the all share index. (Reuters)

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