DUBAI: Rising bad loans dragged down the fourth-quarter results of several Saudi Arabian banks on Thursday, underlining the tougher conditions lenders in the Arab World’s largest economy face after lower oil revenues curbed spending and business activity. Alawwal Bank , Saudi Arabia’s oldest lender, swung to a net loss of 249.3 million riyals ($66.5 million) in the three months to Dec. 31, down from a net profit of 451.3 million riyals in the same quarter of 2015, according to a statement. Alistithmar Capital and EFG Hermes had forecast it would make a quarterly profit of 330.5 million riyals and 438.0 million riyals respectively. Saudi British Bank <1060.SE (SABB)>, the kingdom’s sixth-largest bank by assets, posted a 35 percent drop in its fourth-quarter net profit, missing analysts’ forecasts. Both banks attributed the weaker performance in part to higher operating expenses as a result of a rise in provisions for credit losses, with Alawwal experiencing a 181.5 percent rise in costs. Banque Saudi Fransi , which is partly owned by Credit Agricole , widely missed analysts’ forecasts with a 61 percent drop in fourth-quarter net profit. It blamed a more than doubling in total operating expenses partly due to higher impairment charges for credit losses and a rise in other costs.
Some banks are grappling with a rising tide of bad debt as customers, including several large contractors, struggle due to stalled payments and delayed projects as the government tightens its belt. “It appears several Saudi banks booked higher provisions in the quarter which appear lumpy and may have been related to one or two big companies,” said Chiradeep Ghosh, senior analyst at SICO in Bahrain. Samba Financial Group , Saudi Arabia’s third-largest bank by assets, reported a 12 percent fall in fourth-quarter net profit to 1.09 billion riyals, missing analysts’ forecasts. Operating expenses for the bank rose 15.6 percent on account of higher general and administrative expenses and provisions for credit and rent costs, although it was offset by a drop in salaries and depreciation expenses, it said. Still, in a sign that some lenders are faring better than others, National Commercial Bank and Al Rajhi Bank, the two largest banks, on Wednesday both reported a rise in profits. Another lender hit by impairment charges was Riyad Bank , the fourth-largest lender by assets. On Monday it posted a 65.6 percent fall in fourth-quarter net profit.
