Saudi lenders report strong profit growth amid economic recovery

Al Rajhi Bank, the second-largest lender in the kingdom by assets, recorded a 48% increase in net income to $963.8m

Streets in illuminated cityscape, Riyadh, Saudi Arabia

Four Saudi lenders on Sunday reported strong second-quarter profit growth as the Arab world's biggest economy continues to recover from the coronavirus-induced slowdown.

Al Rajhi Bank, the second-largest lender in the kingdom by assets, recorded a 48 per cent rise in net income to 3.61 billion Saudi riyals ($963.8 million) for the three months to the end of June.

The bank attributed the rise in quarterly income to a jump in operating profit of about 32 per cent to 6.34bn riyals after income from special commissions, financing and investments grew by 27 per cent to 5.05bn riyals, the lender said in a bourse filing to the Tadawul stock exchange, where its shares are traded.

However, impairment charges for loan losses grew by 27.5 per cent, compared to the same period last year to 458m riyals, it said.

As with their global peers, banks in Saudi Arabia, Opec’s biggest oil exporter, faced difficult operating conditions last year as the Covid-19 pandemic disrupted economic momentum.

However, the country's economy is bouncing back with monetary and fiscal support from the government.

Saudi Arabia’s economy is forecast to grow by 2.4 per cent this year and by 4.8 per cent in 2022, driven by a strong rebound in the kingdom's non-oil sector and investment from its sovereign wealth fund, the Public Investment Fund, said the International Monetary Fund.

The kingdom's budget deficit is expected to narrow to 3.3 per cent of gross domestic product in 2021, better than the 4.9 per cent target in the government's budget, assuming oil prices average $63 a barrel this year, Fitch Ratings said last month.

In July, the credit rating agency also affirmed its “BBB+” investment-grade ratings of six Saudi lenders – Arab National Bank, Banque Saudi Fransi, Alinma Bank, Saudi Investment Bank, Bank Aljazira and Gulf International Bank-Saudi Arabia.

Also on Sunday, Saudi Fransi said its second-quarter net income climbed 76 per cent to 770m Saudi riyals as its operating expenses fell by about 28 per cent on the back of a drop in impairment charges for bad loans.

However, the bank’s total income from special commissions, financing and investments fell by 8.3 per cent annually to 1.46bn riyals. Its operating profit remained flat at 1.75bn riyals.

Meanwhile, Riyad Bank reported a 42.2 per cent year-on-year increase in its second-quarter net profit to 1.51bn riyals amid a rise in operating income and a fall in total operating expenses, it said in a statement to the Tadawul exchange.

Net income for the three-month period ended June 30 at Alinma Bank rose by 24 per cent to 710m riyals, mainly due to an increase in net financing and investment income, the lender said in a separate bourse filing.

Updated: August 1st 2021, 12:54 PM