Riyad Bank reports 78% rise in second-quarter profit as impairments drop

Lender currently in merger talks with National Commercial Bank

Saudi Arabia's Tadawul stock exchange saw two listings in the second quarter boosting IPO activity in the region. Bloomberg

Saudi Arabia’s Riyad Bank, which is in talks to merge with National Commercial Bank, posted a 78 per cent year-on-year jump in its second-quarter net profit as operating income rose and provisions for bad loans fell.

Net income for the three-month period ending June 30 climbed to 1.5 billion Saudi riyals (Dh1.47bn), the lender said in a regulatory statement to the Tadawul stock exchange, where its shares trade. Revenue from special commissions and investments for the second quarter rose to 2.61bn riyals, a 29 per cent rise from a year earlier, it added.

Total operating profit for the reporting period surged 23 per cent to 2.67bn riyals.

The lender attributed the rise in operating income to higher net special commission income, fee and commission income, and gains on disposals of non-trading investments.

“The total operating expenses were lower by 10 per cent due to lower impairment charge for credit losses and other financial assets,” the lender said.

The lender said its net income for the first six months of 2019 also climbed 70 per cent to 2.99bn riyals. Assets at the end of the first half grew to 246.12bn riyals from 215.48bn riyals reported at the end of the same period last year.

Riyad Bank’s loans and advances grew to 161.32bn riyals, an 11.8 per cent year-on-year rise, while customers’ deposits advanced 15 per cent to 176.51bn riyals, it said.

Riyad Bank and NCB, which counts Saudi Arabia’s sovereign wealth fund the Public Investment Fund among its shareholders, announced intentions to merge in December last year. If the proposed union goes ahead, it would create a financial institution worth $182bn (Dh668bn) in assets.

The potential deal, which is still under consultation, would be the second bank merger in the kingdom, following that of Saudi British Bank and Alawwal Bank, subsidiaries of HSBC and Royal Bank of Scotland, respectively.

The tie-up is among a string of banking-sector consolidations taking place across the GCC. Dubai Islamic Bank, the largest Sharia-compliant lender in the UAE, is in talks to acquire its Dubai-headquartered competitor Noor Bank. The announcement follows the three-way merger between Abu Dhabi Commercial Bank, Union National Bank and Islamic lender Al Hilal Bank, which completed in May.