JEDDAH: Saudi banks are set for strong earnings per share growth this year, Jadwa Investment said, adding that the said banks have largely completed provisioning against a significant rise in non-performing loans (NPLs). The Saudi banks have now cleaned their loan portfolios after NPLs jumped by 132 percent over the last three years, it noted. Bad loans listed by the Saudi financial sector rose from 1.1 percent of total outstanding loans to 3.2 percent at the end of 2009. Jadwa said that total provisioning – the amount set aside by banks to cover anticipated defaults on loans – had risen to 109 percent of bad loans by the end of last year, as opposed to 86 percent in 2009. The Saudi Arabian Monetary Agency wants banks to increase lending levels, which are well below their pre-2009 highs. Jadwa has predicted that banking sector earnings per share are set to grow by 42 percent this year, taking into account additional profit growth. The finance house also stated that only three banks – Riyad Bank, Bank Al Jazira and Bank Al Bilad – have a loan-loss coverage of less than 100 percent (i.e. total provisions for loan losses are less than the total of their NPLs), meaning that they may need to make further provisions this year. However, the Kingdom's other big banks, including SABB, Banque Saudi Fransi, Samba and Al Rajhi are all well provisioned. Jadwa said that the cost of dealing with NPLs had sliced 26 percent off Saudi banks profits in 2010 alone, as well as dropping dividend distributions. Meanwhile, Saudi Hollandi Bank, partly-owned by Royal Bank of Scotland, reported a 3.5 percent rise in net profit during the first-quarter. The bank made a net profit of SR238 million ($63 million) in the three months to end-March, up from SR230 million in the same period a year earlier. Separately, Saudi stocks fell Tuesday on bank results. Saudi stock benchmark Tadawul All Share Index dropped 0.32 percent to close at 6,590.65 points. “Should there be profit taking, 6,400 is a level we expect the market to drop to,” said Yousef Kassantini, a Saudi-based financial analyst.
