DUBAI: Saudi Hollandi Bank posted a 2.3 percent fall in fourth-quarter net profit on Sunday due to higher staffing costs and provisions for bad loans. Saudi Arabia’s oldest lender made a profit of 451.3 million riyals ($120.3 million) in the three months to Dec. 31, down from 461.9 million riyals in the same quarter of 2014, according to a bourse filing. Four analysts polled by Reuters had forecast on average Hollandi would make a quarterly profit of 487.4 million riyals.
The bank said total operating expenses rose 19.4 percent year on year in the final three months of 2015, driven by “higher salaries and employee related expenses and higher impairment charges for credit losses”. It did not elaborate. Saudi companies issue brief earnings statements early in the reporting period before publishing more detailed results later.
Fitch Ratings said in a Dec. 15 note the operating environment for Saudi banks was becoming tougher due to the effect of lower oil prices on government spending and the knock-on effect on the rest of the economy, which would feed through into asset quality in the next two years.
Hollandi said a 12 percent increase in special commissions and fee income helped to offset a fall in trading income. Overall operating income rose 7.5 percent versus the fourth quarter of 2014, it said without elaborating.
Full-year profit rose 11 percent to 2.02 billion riyals, which Chairman Mubarak al-Khafrah said in a separate statement was due to a 13 percent increase in operating income as well as a 17 percent rise in special commissions without elaborating. Deposits grew 15.7 percent year on year to 88.8 billion riyals on Dec. 31, according to the bourse statement.
The rise in deposits contrasts with other Saudi lenders which have reported falling levels so far in the earnings season, seen as an indicator of the impact lower oil prices are having on liquidity in the Saudi banking system.
Hollandi last month said it was cutting its cash dividend for 2015 and was planning a large bonus share issue to investors to double its capital. The free shares are an accounting device which in effect boosts the company’s equity and therefore underpins future growth.
