Complex Made Simple

Saudi banks overcome difficulties of emergent economic developments

All listed financial institutions announced their preliminary results for the first quarter of 2015, reporting consolidated profits of SAR11.1 billion.

Saudi banks overcame all fears of a drop in quarterly profit, specifically in the first quarter of 2015, reports London-based Asharq Al-Awsat.

Fears of a drop in profit are a result of many emergent economic developments, the most prominent of which were the decline in the price of oil as well as the decline in lending rates for citizens and specifically mortgages.

The decline in lending rates came as a result of applying the decision that requires the client of a mortgage to pay 30 per cent of the property value to the bank before being granted the whole value of the property.

The Saudi Arabian Monetary Agency ordered all banks to apply this decision months ago.

All listed Saudi banks announced their preliminary results for the first quarter of 2015, reporting consolidated profits of SAR11.1 billion, a growth rate of five per cent on an annual basis.

Most banks recorded higher results than expected, most notably Bank AlJazira, which recorded an increase of 38 per cent, followed by Banque Saudi Fransi with a record of 26 per cent, while Al Rajhi Bank and Bank Albilad profits fell below the average analysts’ expectations by 11 and ten per cent respectively.

Talking to Asharq Al-Awsat, Turki Fadaaq, economist and member of the Saudi Arabian Securities and Exchange Commission Riyadh Chamber, says: “Saudi banks do not rely on generating profits on real estate loans nor on fluctuating oil prices. Instead, they heavily rely on corporate lending, accounting for two-thirds of banks’ credits and the rest is distributed over several types of activities, including mortgage loans ranging between 10-12 per cent, and even more by the fact that this ration includes even other non-banks mortgage companies.”