JEDDAH, 30 December 2002 — The interim results of the nine listed commercial banks in Saudi Arabia showed mixed outcome during the first nine months of this year, with the overall net income dropping by 0.8 percent to SR6,188 million compared to SR6,238 million during the first three quarters of 2001. This decline was mainly attributed to a drop of 15.8 percent and 22.2 percent in Saudi American Bank’s (SAMBA) and Al-Rajhi’s net profits, respectively, during the first nine months of this year. Meanwhile, the other seven listed commercial banks have continued to enjoy double-digit growth rates of net profits, as economic conditions continued to improve during the first three quarters of this year, owing to stronger than expected oil prices and record-low interest rates. However, when including the results of the National Commercial Bank (NCB), net profits of the 10 Saudi commercial banks rose by 5.2 percent to SR8,179 million during the first nine months of 2002, compared to SR7,772 million during the same period the year before.
Of the nine listed Saudi commercial banks, the Arab National Bank (ANB) reported the largest increase in net profits, rising by 24.4 percent to SR453 million during the first nine months of 2002 compared to SR364 million during the same period last year. However, despite the 15.8 percent decline, SAMBA remained the largest in terms of net profits, amounting to SR1,413 million during the first three quarters of this year compared to SR1,679 million during the same period in 2001. Riyad Bank, the second largest in terms of net profits, recorded the slowest growth, with its net profits rising by 6.4 percent to SR1,072 million during the first three quarters of this year compared to SR1,007 million during the same period a year ago. While special commission income of listed Saudi banks declined by 23.2 percent to SR11,052 million during the first nine months of 2002, special commission expenses witnessed a sharper drop of 52.9 percent to SR3,347 million during the same period, mainly due to lower interest rates which fell to 2.2 percent on three-month Saudi riyal deposits during the first nine months of this year compared to 4.4 percent during the same period in 2001. As a result, net special commission income rose by 5.7 percent to SR7,705 million during the first three quarters of this year compared to SR7,289 during the same period of 2001.
In terms of the overall balance sheet, total assets of the nine listed Saudi banks improved by 7 percent to SR384.3 billion during the first nine months of 2002 from SR359.2 billion during the same period the year before. SAMBA remained in first place with total assets amounting to SR77.9 billion by end-September 2002, 1.9 percent above their level a year ago. The Saudi Investment Bank (SAIB) outperformed the other eight banks with a 26.4 percent rise in assets to SR18.8 billion during the first three quarters of 2002. The investment portfolio of the nine listed Saudi banks rose by 7.4 percent to SR184 billion by end-September 2002, representing nearly 48 percent of total assets, while loans and advances shot up by 13.6 percent to SR139 billion during the same period, indicating increased demand for banking credit.
On the liabilities side, customer deposits increased by 8.7 percent to SR275 billion in the first nine months of the year, from SR253 billion during the same period in 2001. Shareholders equity expanded by 2.9 percent to SR44.4 billion during the first three quarters of this year, while return on equity (ROE) for the nine listed Saudi banks amounted to 13.9 percent, slightly below the 14.4 percent registered during the first nine months of 2001. Furthermore, return on assets (ROA) fell slightly to 1.61 percent in the first nine months of 2002 from 1.74 percent during the same period last year, owing mainly to the 0.8 percent drop in net profits.
Including NCB, total assets of the banking sector increased by 7.5 percent to SR488 billion during the first nine months of this year compared to SR454 billion during the same period in 2001. This rise was mainly due to a 7.4 percent surge in banks’ investment portfolios to SR223.7 billion as well as a 14.2 percent increase in loans and advances to SR183.4 billion. The rise in lending reflected higher demand for consumer loans in the Kingdom on the back of improved economic conditions due to firm oil prices, in addition to an 8.9 percent rise in customer deposits to SR357.7 billion during the first nine months of this year in the ten commercial banks. Consequently, net operating profits including the NCB rose by 5.2 percent to 8,179 million during the first three quarters of 2002 compared to SR7,772 billion during the same period last year. This rise was mainly the result of a 29.9 percent increase in NCB’s net operating profits during the first three quarters of 2002 to SR1,990 million up from SR1,533 million during the same period the year before.
Despite a 15.8 percent decline in SAMBA’s net profits to SR1,413 million during the first nine months of this year, it remained the largest listed Saudi bank in terms of assets and profits. The decline in net profits was mainly due to a 5.8 percent drop in net commission income, which fell to SR1,790 million compared to SR1,901 million during the same period the year before. While special commission expenses fell by 53.2 percent to SR826 million during the first three quarters of 2002 due to lower interest rates, special commission income declined by 28.6 percent to SR2,616 million during the same period. Total assets of SAMBA rose slightly by 1.9 percent to SR77.9 billion by end- September 2002 compared to SR76.5 billion during the same period the year before.
The slight increase in SAMBA’s assets reflected mainly a 3.5 percent increase in its investment portfolio, which rose to SR31.7 billion during the first nine months of this year from SR30.6 billion during the same period last year.
Consequently, SAMBA’s ROA fell slightly to 1.81 percent during the first three quarters of this year compared to 2.19 percent during the same period last year, while its ROE declined to 14.98 percent from 18.47 percent over the same period a year ago.
Riyad Bank, the second largest listed Saudi bank, outperformed SAMBA with a 6.4 percent rise in net profits to SR1,071 million during the first three quarters of this year compared to SR1,007 million during the same period of 2001. Riyad Bank’s Improved profitability is attributed to a 1.4 percent increase in net special commission income to SR1,679 million during the first nine months of 2002 despite a 24.1 percent drop in its special commission income. Total assets of Riyad Bank increased by 3.3 percent to SR68.2 billion in the first three quarters of this year, owing mainly to a 17.3 percent rise in the bank’s investment portfolio, which increased to SR32.5 billion from SR27.7 billion the year before. In addition, Riyad Bank’s loans and advances portfolio rose by 13.3 percent to SR23.5 billion compared to SR20.7 billion last year. This increase was financed by a 13.9 percent rise in the bank’s customer deposits, which increased to SR43.2 billion by end- September 2002 from SR37.9 billion during the same period last year. However, shareholders equity fell by 5.2 percent to SR8.7 billion during the first nine months of the year from SR9.2 billion during the same period in 2001. Consequently, ROE improved to 12.28 percent in the first nine month of the year compared to 10.94 percent during the same period a year ago. In addition, Riyad Bank’s return on assets ROA also improved to 1.57 percent from 1.53 percent over the same period.
Al-Rajhi Bank, the third largest listed bank, was the worst performer during the first three quarters of this year, with its net profits falling by 22.2 percent to SR986.7 million compared to SR1,268 million during the first nine months of 2001. This decline reflected a 9 percent drop in the bank’s net gains on investment, which fell to SR2,081 million during the first nine months of the year from SR2,287 million during the same period the year before. In addition to that, income from fees and services witnessed a sharp drop, falling by 52.5 percent to SR27.4 million in the first nine months of 2002 compared to SR57.6 million during the same period the previous year.
However, Al-Rajhi’s foreign exchange income rose by 18.9 percent to SR133 million during the first nine months of the year from SR111 million a year ago. The bank’s provisioning for credit losses rose further by 6.5 percent in the first nine months of the year, amounting to SR622 million compared to SR584 million during the same period a year ago. Nonetheless, Al-Rajhi bank’s total assets jumped by 9.8 percent to SR57.3 billion by end-September 2002, reflecting mainly a 12.1 percent in the bank’s investment portfolio, which amounted to SR49.1 billion during the first three quarters of the year, up from SR43.8 billion during the same period last year. While customer deposits increased by 11.4 percent to SR41.8, Al- Rajhi Bank’s loans portfolio rose by 7 percent to SR1,212 million from SR1,133 million the year before. In addition, the bank’s shareholders equity fell slightly by 0.5 percent in the first nine months of the year to SR7.1 billion from SR7.74 billion during the same period a year ago. Reflecting the sharp drop in its net profits, Al-Rajhi Bank’s ROE and ROA declined to 12.8 percent and 1.72 percent, respectively, from 16.37 percent and 2.43 percent during the same period of 2001.
Medium-size banks, Saudi British Bank (SABB), ANB, AlBank AlSaudi AlFransi (BSF), and Saudi Hollandi Bank (SHB) registered double-digit profit growth during the first nine months of 2002, rising by 15.2 percent, 24.4 percent, 20.1 percent and 15.6 percent, respectively. Net income of SABB increased to SR735 million during the first nine months of the year from SR639 million during the same period the year before, owing mainly to a 7.5 percent rise of net special commission income to SR1,074 million and a 26.4 percent increase in income from fees and services to SR211 million from SR167 million during the first nine months of 2001.
ANB reported the largest increase in net operating income, rising by 24.4 percent to SR453 million during the first nine months of 2002 compared to SR364 million during the same period last year. ANB’s profits were mainly driven by a 12.5 percent rise in net special commission income, in addition to a sharp increase in gains on investment, amounting to SR38 million during the first three quarters of this year compared to SR4.1 million during the same period a year ago. The BSF came in second place in terms of profit growth, with its net income rising by 20.1 percent to SR750 million as its net special commission income soared by 17 percent to SR1,026 million in the first nine months of the year compared to SR877 million during the same period last year. In addition, income from fees and services rose by 12.8 percent to SR166 million from SR147 million during the same period last year.
Profits of SHB were also up 15.6 percent to SR430 million during the first three quarters of the year mainly due to a 16.1 percent rise in net commission income.
In terms of assets, ANB topped the list with a 21.4 percent growth in its total assets, followed by BSF with 10.9 percent growth and SHB rising by 8 percent during the first three quarters of this year.
SABB’s total assets increased only by 2.1 percent to SR43.8 billion in the first nine months of 2002, mainly due to a 16.8 percent rise in its loans portfolio which amounted to SR19.3 billion. The main driver behind growth in assets for the four medium-size banks was the expansion of banks’ loans portfolios that increased by 16.8 percent, 15.6 percent, 16.6 percent and 6.8 percent for each of SABB, ANB, BSF and SHB, respectively. This expansion was facilitated by a corresponding rise in customer deposits, rising by 14.6 percent, 12.1 percent, 3.4 percent and 6 percent, respectively, for each of the four banks. Consequently, performance ratios for the four medium-size banks improved during the three quarters of the year with ROE of SHB topping the list at 18.24 percent, while BSF generated the highest ROA of 1.72 percent during the same period.
The two smaller banks, SAIB and Bank Al-Jazira (BAJ) both did well during the first nine months of the year with the former registering a 23.9 percent rise in net income, while the latter reported a 12.8 percent increase. SAIB’s profits were mainly generated from a 24.2 percent increase in net commission income as well as a 5.7 percent rise in income from fees and services.
BAJ’s net commission income rose by 6.5 percent during the first nine months of 2002, while fees and services income increased by 14.1 percent during the same period. Total assets of SAIB recorded the largest percentage growth of the nine listed Saudi banks with a 26.4 percent rise to SR18.8 billion during the first three quarters of the year compared to SR14.9 billion during the same period in 2001. This increase was facilitated by an 18.6 percent and 18.2 percent rise in the bank’s investment and loans portfolios, respectively. On the other hand, BAJ’s assets edged up slightly by 2.1 percent to SR5.2 billion during the first nine months of the year. As a result, SAIB’s ROE improved to 12.81 percent in the first three quarters of 2002 from 11.26 percent during the same period last year, while its return on assets ROA declined to 1.60 percent from 1.63 percent during the same period.
(Said Al-Shaikh is chief economist at the National Commercial Bank in Jeddah)
