Saudi banks’ net income exceeds SR 35 bn in 2012

Updated 11 March 2013
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Saudi banks’ net income exceeds SR 35 bn in 2012

The Saudi banking system anchored its stability with precautionary measures and effective capacity utilization over the past two years. High liquidity, adequate capitalization and prudent risk management and supervision represent the backbone of Saudi's banking overhaul. Following a successful rebound in 2011, the 12 locally incorporated banks' net income during 2012 recorded a staggering SR 35.1 billion, an annual growth rate of 11 percent, according to a report by the National Commercial Bank (NCB).
Net special commission income accelerated by 5.3 percent last year as the low interest rate environment was offset by expanding the loans portfolio. Banks granted new credit facilitates to the public and private sector over the course of 2012 worth SR 143.4 billion, an increase of 16.7 percent. Additionally, banking fees continue to grow at double-digits as activity in the stock market supported higher brokerage income levels. With a large deposit base, however, capacity utilization has not reached the optimum level despite the pickup in lending. Most importantly, the report said non-performing loans (NPL) have declined to 2.0 percent of gross loans, down from 2.2 percent in 2011. Accordingly, the NPL coverage ratio for the domestic banking system edged higher to 138.2 percent, outperforming many global counterparts.
The NCB report said equity market rebounded off 2011's contraction and recorded a gain of 6 percent during 2012 on the back of strong fundamentals and healthy investor appetite.
However, Tadawul continued to be heavily influenced by global economic developments, which easily swayed stock prices either way. The market's peak was recorded in early April as the index increased by 23.6 percent, but the performance was short-lived as Tadawul wiped almost 90 percent of its gains within three months.
Global turmoil as well as the Arab Spring weighed negatively on the local market, but with a gradual return to a semblance of normalcy in the US, euro zone, and China, Tadawul is expected to run at full throttle this year. Market activity recorded a growth of 73.8 percent as average daily traded values rose to SR 7.7 billion compared to SR 4.4 billion during 2011 and the depth of the market has expanded by seven initial public offerings (IPO) in 2012 worth SR 5.3 billion, up from SR 1.7 billion.
The bank said, in line with market activity, investor appetite for IPOs significantly increased as oversubscription rose from an average of 2.19 in 2011 to 5.62 times during 2012. Additionally, corporate earnings have been supported by growing business activities as the market's cumulative net income rose to SR 97.7 billion, approaching the SR 100 billion mark. Ostensibly, stock valuations remain attractive given the relatively low price-to-earnings (PE) ratio of 12.75 by the end of 2012, offering lucrative opportunities for investors.
On the other hand, given the large share of retail investors, representing over 90 percent of traders, speculative trading continues to outweigh long-term investment horizons, which will surely remain a drag on Tadawul's potential.
The NCB report also said Saudi Sukuk issuances in terms of value and number have managed to shake off the aftermath of the financial crisis by setting a record year. Malaysia yet again topped the charts by issuing 62.2 percent of global sukuk, which amounted to $90.7 billion, doubling 2011's value. Saudi Arabia experienced a record setting year that included its first sovereign sukuk issuance. The Saudi market recorded 15 issuances worth $ 10.5 billion, surpassing 2011's level by four folds.
The General Authority for Civil Aviation (GACA) issued the first sovereign 10-year Murabaha worth $ 4 billion to be mainly utilized for redeveloping King Abdulaziz Airport in Jeddah. GACA's sukuk will be important in many facets especially that it will provide a pricing benchmark for longer-tenor sukuk, energize an alternative venue for financing infrastructure projects, and enable the government to benefit from currently low yields.
Furthermore, Banque Saudi Fransi and Saudi Electricity Company both issued sukuk worth $ 1.25 billion each. On the foreign-currency front, the Islamic Development Bank issued a 5-year USD denominated Wakala Bel-Istithmar Sukuk in two tranches worth a total of $ 1.3 billion. The majority of issuances were denominated in Saudi riyal with yields ranging from 6-month SAIBOR to SEC's 4.2 percent flat rate.
The bank said: “We expect 2013 to be another record setting year as Islamic instruments become a viable avenue for project financing in the Saudi market.”


Samsung Electronics reports 52% jump in Q1 net profit

Updated 26 April 2018
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Samsung Electronics reports 52% jump in Q1 net profit

  • Profits bump thanks to strong demand for memory chips, smartphones
  • Net profit for the January to March period hit 11.69 trillion won ($10.8 billion)

SEOUL:  Samsung Electronics reported a 52 percent jump in its first quarter net profit Thursday, thanks to strong demand for memory chips and its latest flagship smartphone.
Net profit for the January to March period hit 11.69 trillion won ($10.8 billion), up from 7.68 trillion won a year earlier, the company said in a regulatory filing.
Operating profit was a record 15.64 trillion won, in line with the estimate of 15.6 trillion won suggested in a preliminary guidance report released earlier this month.
“The semiconductor business posted solid earnings — 11.55 trillion won in operating profit on a 20.78 trillion won revenue — on strong demand for memory chips,” the company said in a statement.
Total sales grew 19.8 percent to 60.56 trillion won and Samsung expects the memory business to maintain its strong performance in the second quarter.
But generating overall earnings growth across the company will be a challenge due to weakness in the display panel segment and a decline in profitability in the mobile business in the face of rising competition, it said.