Saudi Hollandi Bank had the best second quarter among three local lenders that announced quarterly earnings on Saturday after it cut costs by more than half to offset a decline in lending income. The bank, part owned by a Royal Bank of Scotland-led consortium that may sell its stake through a public offering, has more than doubled its net profit in the three months to end-June to 250.5 million riyals ($66.8 million), beating analysts' forecasts.
Profits were 90.6 million riyals a year earlier. While both its lending and non-lending net incomes fell by 15.6 and 8.2 percent respectively during the quarter, Hollandi's operating costs shrank to 228.3 million riyals from 461.9 million riyals in the second quarter of 2009.
Operating profit - the sum of lending and non-lending net incomes - fell 13.3 percent to 478.8 million riyals. By the end of June, the annual decline in Hollandi's loan portfolio accelerated to 11.1 percent from 7.4 percent in the 12 months to end-March 2010.
The much bigger Riyad Bank posted a 16.5 percent fall in second quarter net profit mainly after lending income fell for the second straight quarter while its costs soared. Riyad - Saudi Arabia's third-largest bank by market value - exceeded average forecasts by analysts with 766 million riyals in the three months to end-June after 918 million riyals in the same period a year ago.
Its net lending income fell 10.5 percent to 1.03 billion riyals, more than the 9 percent annual decline it recorded in the first quarter. The annual growth in the loans portfolio fell to 0.2 percent by the end of June from 6.1 percent by the end of March.
Income from banking services - brokerage, investment and foreign exchange operations - rose by almost 33 percent to 499 million riyals during the second quarter, based on Reuters calculations.
This means that operating costs rose 25.6 percent to 761 million riyals from 606 million riyals in the second quarter of 2009 but still below 785 million riyals in the first quarter, based on Reuters calculations. The Saudi stock exchange erased during the second quarter much of the 11.1 percent gains it made during the first quarter.