Al-Rajhi Bank, the largest listed bank in the Middle East, and small lender Bank AlJazira saw quarterly profit slip below forecasts due to provisions, depressing Saudi shares. The two lenders are the latest banks in the top oil exporter to post lower profits after heavyweights Samba Financial Group and Banque Saudi Fransi announced lower profit on Saturday.
Earnings at most Saudi banks came under pressure in 2009 as a result of provisions against troubled family firms, and first-quarter earnings were depressed by a slowdown in lending.
"Banks are cleaning up their balance sheets through gradual provisioning before extending new loans, and the private sector also became more risk averse, postponing projects due to high cost of financing," said Mohammed Ishaq Ali, who manages a Saudi equity fund at Al Rajhi Capital, affiliated to the same bank. Al-Rajhi said net profit fell 2.8 percent to 1.68 billion riyals ($439 million), below the average 1.75 billion riyals forecast by five analysts in a Reuters survey. It cited provisions as a reason for the fall, without disclosing either their size nor their purpose.
Shares in Al-Rajhi fell 3 percent with AlJazira easing 2.73 percent, dragging the Saudi index down 1.2 percent, its biggest fall in more than two months.