HSBC's Saudi affiliate SABB bank missed forecasts and two other banks in the kingdom reported sharp falls due to high provisions to counter exposure to troubled Saudi firms and a slowdown in lending. The second quarter results for SABB, Arab National Bank (ANB), and Saudi Investment Bank (SAIB) on Monday reflect a challenging period for the region's banks as they struggle to cover loan losses in a flat market still reeling from the global financial crisis. Saudi lenders had a difficult year in 2009 with profitability eroded by a doubling of provisions for non-performing loans to almost SR11 billion as a rising number of Saudi and regional firms ran into financial problems. SABB, the fifth-largest Saudi bank by market value, said it made a net profit of SR447 million ($119.2 million) in the second quarter, down 34 percent from the same period in 2009. Analysts surveyed by Reuters had expected on average net profit of SR613.85 million. Shares in SABB bank fell by as much as 4.6 percent before closing 1.6 percent down. Shares in ANB and SAIB ended 2.5 percent and 2 percent lower respectively. “The decrease in the profits ... is mainly due to the bank's conservative policy in increasing provisions to support the bank's financial position,” SABB said in a statement. It did not give further details on the size of these provisions or their purposes. While it raised its net lending income by 5.5 percent to SR943 million, SABB's non-lending net income fell by almost 15 percent to SR417 million. Non-lending income includes brokerage, foreign exchange and investment. Operating costs - which include salaries and provisions for bad loans - rose 29.1 percent to SR913 million, based on Reuters calculations. Earnings per share by end-June stood at SR1.42 down 25.7 percent from a year earlier. SABB, 40-percent owned by HSBC, had to book SR176.5 million to cover loan losses during the first quarter of 2010. This followed provisions worth SR1.5 billion for all of 2009 which covered less than half of the SR3.53 billion of non-performing loans it had by end-2009. By end-June, SABB's loans portfolio shrank by 5 percent to SR74.8 billion, while it was down 4.5 percent by end-March at SR75.7 billion. Samba Financial Group, the second-largest Saudi bank by market value, posted a 1.9 percent drop in second quarter net profit after its net lending income fell 7.8 percent, but the earnings were better than analysts' forecasts. ANB, 40-percent owned by Jordan's Arab Bank, posted a fall of SR117 million in second-quarter net profit to SR629 million after its net lending income fell by SR119 million to SR775 million. Loans fell 9 percent to SR64.8 billion by end June, while they were down 10.1 percent at SR65.4 billion by end-March. Operating costs rose by about 4 percent to SR486 million, suggesting little change in provisions booked during the period. Provisions led the smaller Saudi Investment Bank (SAIB) to post a second-quarter profit of SR22 million, an 88 percent drop from the year ago period, despite a relatively strong 25 percent rise in lending income. Deutsche Bank had forecast net income for the second quarter of about SR90 million. SAIB, set up in 1976, has a third of its shares floated on the Saudi Tadawul. Its shareholders include JP Morgan Chase, Japan's Mizuho Corporate Bank, the Saudi Public Pension Agency, private institutions and retail investors. JP Morgan International Finance Ltd holds a 7.4 percent stake in SAIB which in turn holds a 50 percent stake in the Saudi affiliate of American Express.
