Saudi Arabia’s Samba, Alawwal underline banking upturn

Saudi Arabian banks showed more evidence of improving results on Wednesday with stronger fourth-quarter performances from two of the kingdom’s larger lenders.

Of the seven main Saudi banks to report so far, all have posted higher profits for the quarter, although few have done enough to beat market forecasts.

Samba Financial Group, Saudi’s third-largest bank by assets, was the latest to do so on Wednesday, recording an 11.4 per cent rise in fourth-quarter net profit, in line with analysts’ expectations.

Meanwhile, Alawwal Bank, Saudi’s oldest lender, swung to a fourth-quarter net profit as operating expenses almost halved.

After several years of fighting the fallout from weaker oil prices, analysts expect the Saudi banking sector’s performance in the coming quarters to be helped by a pick up in liquidity thanks to a combination of looser public spending and planned international sovereign debt issuance.

Samba made a profit of SAR1.21bn ($323m) in the three months to December 31, up from SAR1.09bn in the same period a year earlier, it said in a bourse statement.

Three analysts had on average forecast the bank would make a quarterly net profit of SAR1.21bn.

Samba said its increase in net profit was in part due to a rise in net special commission income and gains on non-trading investments and other operating income.

Challenging conditions

Alawwal Bank said it made a profit of SAR326.5m in the three months to December 31, compared to a loss of SAR249.3m in the corresponding quarter of 2016.

“In the face of challenging economic conditions in 2017, lending activity was slower than anticipated but with a more positive industry outlook in 2018 improvements are expected,” Alawwal managing director Soren Nikolajsen said.

NCB Capital had forecast Alawwal would make a quarterly profit of SAR281m, while EFG Hermes predicted it at SAR339m.

Alawwal’s performance was aided by a drop in impairment charges for credit losses, general and administrative expenses, rent, salaries and other staff-related costs.

The bank is in merger talks 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, Saudi Arabia’s central bank governor said last month.

Loans and advances and deposits at both Samba and Alawwal slid during the quarter, as in previous quarters.

Deposit levels began to fall for some Saudi banks more than two years ago as the government, which had placed substantial amounts of oil revenue with banks when prices were high, withdrew cash to help bridge a budget shortfall.