A poor first quarter for Saudi bank stocks

Banks have taken a beating on the Tadawul

Bank stocks are taking a beating on the Saudi bourse. Investors are not impressed with the lacklustre performances that lenders in the largest GCC economy have reported for the first quarter. Of the 11 lenders listed on the Saudi Tadawul All Share Index, eight have so far announced earnings, and six of those reported declines. Bank AlBilad and Riyad Bank are the two exceptions so far, reporting a rise in profit driven by growth in core banking activities and service fees.

But even Riyad Bank, which saw profits rise 55 per cent, missed analysts' estimates, while provisions for bad loans for both lenders also rose significantly. SABB, Al Rajhi Bank, Bank AlJazira, Banque Saudi Fransi, Saudi Hollandi Bank and Samba Financial Group have reported shrinking profits, mainly on account of a drop in revenue and rising provisions for bad loans. Samba, the second largest lender in the kingdom, at least beat forecasts, but investors are still not rejoicing.

"Profit decline was expected as provisioning is still rising and nobody had expected the asset quality to improve. In fact, banks across the region require a few more quarters before they can balance out their books," said Hassan Awan, an associate in the asset management division of the investment bank The National Investor. Saudi Investment Bank, Arab National Bank and Alinma Bank have yet to announce first-quarter financial details.

The banking index rose only once in the past five trading sessions on the Saudi bourse, and even then just marginally. Only two Saudi banking stocks had advanced at the close of yesterday's trading: Saudi Hollandi by 0.9 per cent and Samba by 0.4 per cent. Bank Al Bilad, AlJazira and Al Rajhi were the main losers yesterday, declining 3.1, 2.7 and 2.68 per cent, respectively. "The sell-off is in banking stocks, but they are also weighing heavy on the index," Mr Awan said.

Bank and financial services stocks account for almost half of the regional markets' total capitalisation, and they usually determine the direction of trade, he said. Any strength or weakness in banks is usually reflected in the movement of regional indexes. skhan@thenational.ae