Saudi Banks showed more proof of improving results last year, with stronger fourth quarter performances from a couple of the kingdom’s larger lenders.
Among the seven main Saudi Banks to report so far, all have posted higher profits for the quarter, though few of them have done enough to beat market expectations.
Saudi’s third largest bank by asset, Samba Financial Group was the latest to do so with a record of 11.4 percent rise in their net profit for the fourth quarter, in line with analysts’ anticipations.
For its part, Alawwal Bank, Saudi’s oldest lender, was able to reduce operating expenses by almost 50% thus recording impressive fourth quarter net profits.
Financial observers expect the Saudi banking sector’s performance to be helped by a pick-up in liquidity in the coming quarters thanks to a combination of more public spending and planned international sovereign debt insurance, after several years of fighting the fallout from weaker oil prices.
Samba Financial Group said in a recent statement that it had made a profit of 1.21 billion riyals ($323 million) in the 3 months to 31st Dec., an increase from the 1.09 billion riyals in the same period in the previous year.
Three analysts had predicted that the bank would make a net profit of 1.21 billion riyals in the quarter.
Alawwal Bank reported a profit of 326.5 million riyals in the 3 months to 31st Dec., compared to a loss of 249.3 million riyals in the same quarter of the previous year.
The managing director of Alawwal, Soren Nikolajsen said that in the face of challenging economic conditions in 2017, lending activity was slower than expected but with a more positive industry outlook in 2018, improvements are anticipated.
EFG Hermes had forecasted that Alawwal would make a quarterly profit of 339 million riyals, while NCB Capital predicted a quarterly profit of 281 million riyals.
The performance of Alawwal was aided by a reduction in damage charges for credit losses, administrative and general expenses, salaries, rent and other staff-related costs.
Saudi Arabia’s central bank governor said that the bank is in talks for a merger with fellow Saudi lender, Saudi British Bank (SABB), with the outlook for the proposed merger to become clear by the end of the first quarter.
Samba and Alawwal’s loans, advances and deposits decreased considerably during the quarter, as in previous quarters.
Deposit levels started shrinking over the last two years in many Saudi banks as the government began withdrawing money from considerable amounts of oil revenue it had banked when prices were high to tackle budgetary shortfalls.