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Saudi banks second-quarter profits seen falling
Source: BI-ME and Bloomberg , Author: BI-ME staff
Posted: Sat July 11, 2009 6:32 pm
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SAUDI ARABIA. Saudi Arabian banks may report declines in second-quarter profit after they tightened lending rules and increased provisions for bad loans.

Net income at the 10 biggest Saudi banks probably dropped by an average of 19%, according to EFG-Hermes Holding, the largest Egyptian investment bank by market value. Dubai-based Al Mal Capital forecasts that profit at the five Banks it tracks declined an average of 11%.

Saudi banks have been hurt by falling oil prices, which slowed growth in the biggest Arab economy and forced some of the kingdom’s biggest family-owned companies to restructure debts.

The International Monetary Fund forecast in May that the Saudi economy would shrink 0.9% this year amid the first global recession since World War II. 

Al-Rajhi Bank, Saudi Arabia’s biggest lender by market value, may say net income declined 2.4% to SAR1.70 billion US($450 million), according to the average estimate from three analysts surveyed by Bloomberg. Samba Financial Group, the second-largest bank in the kingdom, may say profit dropped 9.1%, according to the average of four estimates.

Riyad Bank, the kingdom’s third-largest by market value, may report a 305 drop in net income, according to the average of three analyst estimates. Saudi British Bank, the fourth-largest, may post a 21% decline in net income, according to the average of three estimates.

The Algosaibi and Saad groups, two of Saudi Arabia’s biggest family-owned companies, have announced plans to restructure their debts in the past two months. Together they have borrowed at least US$15.7 billion from more than 100 international and regional banks, according to documents prepared by some of the lenders.

Saudi banks have probably loaned the groups between US$4 billion and US$7 billion Algosaibi and Saad, HSBC said in a 7 July report.

Banks provided at least US$64 billion to Saudi borrowers in the past five years as record oil prices spurred economic growth in the kingdom, according to data compiled by Bloomberg.

Saudi bank lending was down 1% in the first five months of the year, according to HSBC. The decline has forced some Saudi companies to seek government loans.

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