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Sat 9 Oct 2010 08:37 PM

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Saudi shares decline on concern about banking financial results

Analysts aren't seeing any key changes in indicators for the banks in Q3 of 2010

Saudi shares decline on concern about banking financial results
SHARES DECLINE: Lack of changes in indicators in Q3 of 2010 prompting concern about bank earnings. (ITP Images)

Saudi Arabian shares declined on uncertainty about financial results for Saudi banks during the third quarter in the Arab world’s biggest economy.

The Tadawul All Share Index gauge shed 0.4 percent to 6,392.02, while the Tadawul All Share Bank Index fell 1 percent in Riyadh. Al Rajhi Bank, the kingdom’s largest lender by market value, and Banque Saudi Fransi were among nine of 11 Saudi banks that declined in trading today.

In a phone interview from Riyadh, Murad Ansari, head of research, EFG Hermes, said: “To a certain extent there is some concern about bank earnings. We aren’t seeing any key changes in indicators for the banks in the third quarter of 2010. There was a run up in stock prices through September, and we are seeing a slight correction before the results.”

Saudi banks’ earnings have been hurt since the onset of the global credit crisis as provisions for bad loans rose and lending slowed after the Saad and Algosaibi business groups defaulted on at least $15.7 billion of loans. Saudi bank credit to industry rose 3.3 percent in August from a year ago.

Low interest rates have also exerted pressure on Saudi banks’ profitability through reduced margins and lower business growth, Moody’s Investors Service said on Sept 27. Samba Financial Group, the second largest by market value, and Riyad Bank posted declines in net income during the second quarter.

Al Rajhi declined to the lowest level since Aug 30, falling 1.3 percent to 76.5 riyals, while Banque Saudi Fransi, the Saudi lender part owned by Credit Agricole, shed 1.6 percent to 48 riyals. The Saudi British Bank, a lender 40 percent owned by HSBC Holdings, dropped 2.4 percent to 45.4 riyals, the steepest decline since July 3.

Saudi Arabia is the only Gulf Arab benchmark tracked by Bloomberg that trades on a Saturday.

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