Dubai: Saudi banks continued to report robust results in the second quarter with more than 8 per cent average net profit growth on the back of strong loan book expansion, net interest margin resilience and double-digit non-interest income growth across the board.
Preliminary reports form investment banks and analysts suggest commercial bank profits in the kingdom rose by 8.5 per cent to 21.7 billion Saudi riyals (Dh21.24 billion) in the first half of the current year compared to 20 billion riyals in the same period last year.
“For the seven banks we cover, net income was 5 per cent above consensus on aggregate. Net income growth accelerated to 7 per cent year on year versus 4 per cent in the first quarter of 2014,” Suha Urgan, an analyst with Shuaa Capital wrote in a note.
Among the Saudi banks, Saudi Hollandi Bank, posted the highest net income growth at 28 per cent year on year followed by Riyad Bank, Banque Saudi Fransi and SABB (formerly Saudi British Bank), all posting year-on-year growth at mid-teens.
Samba and Arab National Bank lagged with single digit year on year growth, while Al Rajhi’s net income dropped year on year for the fourth consecutive quarter.
Al Rajhi’s second quarter earnings fell 8.2 per cent year-on-year, hit again by higher provisioning. The bank said it made 1.95 billion riyals ($520 million) in the three months ending June 30, compared with 2.12 billion riyals in the same period a year earlier, citing an increase in total operating expenses for the drop.
National Commercial Bank posted a 22 per cent jump in second-quarter net profit. The kingdom’s biggest bank by assets made 2.425 billion riyals ($647 million) in the three months ended June 30, compared with 1.99 billion riyals in the corresponding period of 2013.
The NCB said the growth was driven by an 8.3 per cent year-on-year increase in net special commissions income, as well as gains of 3.9 per cent and 11.2 per cent in banking and foreign exchange income respectively.
“We expected net interest margin [NIM] pressures to persist this quarter on the back of low asset yields and limited room for improvement in cost of funding. The second quarter 2014 results surprised us positively as the banks’ NIMs [on average assets] were flat to +12 basis points quarter on quarter,” said a report from Shuaa Capital
SABB, which had more stable NIMs compared to peers over the last two years, led the pack with 12bps quarter on quarter improvement in the second quarter of 2014 Samba, which preferred NIM resilience over net interest income growth over the last two years, also delivered 10bps quarter on quarter NIM improvement.