Saudi banks post SR26.3bn profits despite world financial crisis

Saudi Arabia is home to 19 banks including 12 local and 7 regional and international banks.

The 12 Saudi banks posted a total of SR26.3bn annual profits for 2008 compared to SR27bn in 2007.

The banking sector managed, despite the impact of the world financial crisis, to survive without any government intervention.

A report by Global Investment House has indicated that Saudi banks constitute 32% of the market value of Tadawul, while their assets constitute 73% of the gross national product.

In general, the ratio of loans compared to assets is 80%, while the assets themselves grew by 6% from 2002 to 2007 to reach SR1.2 trillion up to December 2008.

Mixed results

Saudi banks have posted mixed financial results: Saudi French Bank posted SR2.8bn against SR2.7bn in 2007, up 3.5%.

AlBilad Bank also announced a profit, posting SR125m compared to SR72m in 2007 up 73%, while SABB profits grew by 12% to reach SR2.bn.

Saudi Hollandi Bank registered the highest rise, of 179%, to reach SR1.2bn, while Arab National Bank profits rose by only 1% to SR2.4bn.

Al Rajhi also posted a rise of 1.1% to SR6.5bn, while Al Inmaa bank posted SR360m in its first full year of operation.

Samba Financial Group posted a net profit of SR4.4m compared to SR4.8m in 2007, down by 7.7%. National Commercial Bank (AlAhli) posted a net profit of SR2.031m, down by 66% compared to 2007.

Sama role in lowering impact

Sama has played a larger role in lowering the impact of the world financial crisis on the Saudi economy. The agency kept a close eye on market developments and was ready to provide liquidity to the market if necessary, it also announced its readiness to pump SR150bn into the sector to help banks cope with crisis.

Sama has already pumped $2bn to $3bn into the stock market.

New interest cut to activate liquidity

Saudi Arabia has lowered the interest rate from 2.5% to 2%, including lowering the interest rate on re-purchasing returns on banks assets from 1.5% to 0.75%.

The decision was issued by Sama with immediate effect and was issued after close monitoring of the market.

Sama said that the market response to such measures was very positive, but added that the current situation requires another amendment on the interest rate in re-purchasing returns.

Saudi Arabia has already announced lowering the RIPO and base interest by 0.50% to increase liquidity in the financial sector and meet the local demand for cash. The RIPO was cut to 2.5% from 3% while the return price on re-purchasing was lowered from 2% to 1.5%.

Sama has kept the compulsory reserves for banks unchanged, while stating that it was vital to maintain liquidity to meet local demands on credit.

See also:
Saudi Arabia announces SR1.1 trillion budget
Saudi loans for construction sector top SR24bn