Saudi banks’ Q1 profit growth slows on lower fees: Albilad Capital

Saudi banks saw their combined profit growth slow in the first quarter of this year, compared to same period last year, mainly due to lower fees and higher staff expenses, Albilad Capital said in a statement.

Annual growth of banking fees stood at 5.9 percent in the first three months of 2015, compared to 10.7 percent during the same quarter last year. The decrease was largely attributed to the enforcement of new finance rules, which began in the third quarter of last year.

Meanwhile, staff expenses and salaries grew by 25 percent compared to the same period last year due to two months bonuses which were distributed to bankers.

The investment arm of Bank Albilad added that Saudi banks managed to increase the credit quality of their loan portfolios, as non-performing loans fell by 6.5 percent compared to 2014. The average rate of non-performing loans to total loans was down 20 basis points to reach 1.12 percent by end of the first quarter.

Retail banking sector profits were down 10 percent by end of first quarter compared to same period a year ago, with the sector’s contribution to overall profits down to 20 percent compared to 23.8 percent in first quarter 2014.

The figures also show declining retail banking profits for a total of six banks, while another six banks saw an increase in profits coming from the same sector. Only three banks control 70 percent of the retail banking sector profits. Al-Rajhi Bank held 38 percent, while Riyad Bank and National Commercial Bank (NCB) each accounted for 16 percent.

Corporates held a bigger share of first-quarter earnings, contributing 42.6 percent of total banking profit, compared to 39.5 percent during the same period year ago.

Treasury sector profits in Saudi banks were also up by 10 percent during the period.

Profit generated from brokerages and financial services were down two percent in Q1-2015 to SAR 695 million, despite a 22 percent increase in trading on the Saudi market.

Total credits provisions decreased 21 percent in first quarter to SAR 1.45 billion, which were led by a 51 percent decline in overall provisions taken by corporates, when compared to Q1-2014.
 

Meanwhile, Retail sector provisions declined by five percent in first quarter.