SABB, HSBC's Saudi affiliate, reported a worse than expected 19.8 percent fall in third-quarter net profit, hit by an increase in the scale of its provisions for bad loans. The lender made SR570 million ($152 million) in the three months to Sept. 30 against SR711.1 million a year earlier, it said in a statement posted on the bourse's website. Shares in the bank, in which HSBC holds a 40 percent stake, fell by up to 4.67 percent after the announcement. The drop in SABB's quarterly earnings was twice as bad as analysts had predicted and is the worst performance by four listed Saudi banks that have announced their earnings so far. In a statement emailed to Reuters, SABB said: “Provision for possible credit losses increased by SR505 million compared with the (January-September) period in 2008 reflecting SABB's conservative credit policy in the current economic environment.” This meant that the bank booked provisions for loan losses worth some SR351 million for the third-quarter alone, its highest quarterly provisioning this year. SABB set aside SR276.8 million in provisions for loan losses during the January-September period of last year and SR430.7 million for the same purpose during the first half of 2009, according to its financial statements. Several research reports said the profitability of Saudi banks will continue to be strained by provisions for possible loan losses linked to troubled conglomerates Saad Group and AHAB. SABB made provisions for loan losses worth SR314.7 million during the second quarter of this year which saw the bank's net profit fall 15 percent. In spite of a drop in both loans and deposits, SABB achieved a 10.7 percent rise in its net operating income to SR1.3 billion after net income from lending rose 13.1 percent to SR854 million.
