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20% Decrease in Incomes of Saudi Arabian Banks

Saudi Arabia : 04 March 2010

Due to tight lending position prompted by international monetary crisis as well as debt non-payment by two local companies, Saudi Arabian banks suffered reduction of net income by over 20% in January.

Saudi Arabian Monetary Agency (Sama) informed that the net profits of the kingdom’s twelve commercial banks dropped from 3.58 billion Saudi Riyal in January, 2009 to 2.58 billion Saudi Riyal in January, 2010.

Senior Economist at Samba, one of the largest bank in Saudi Arabia said that the position of the banks in the Gulf region is more optimistic because capital inflows get better and governments spend increasing amounts of petro dollars.

As a consequence of losses in the last quarter of 2008, there was a decline of about 12% in net earnings by some Saudi banks by some Saudi banks during 2008. But in spite of provision of 10 billion Saudi Riyals, the net earnings of banks dropped by only about 0.35 last year. Economists predict lending by Saudi Arabian banks, which manage the second largest assets in the Arab World after the UAE, will be comparatively slow in the 1st half of 2010, before it starts to gear up in the 2nd half. Sama, the kingdom’s central bank has eased monetary measures, but the banks have maintained their cautious lending strategy.

Riyadh based Jadwa Investments said that low interest rates at an all-time low of 0.25% suit Saudi Arabia to encourage banks to lend more. Sama is expected to maintain the status quo until there is a sustain able growth in bank lending to the private sector. Lending by Saudi Arabian banks to the private sector decreased by 14.5 billion Saudi Riyals in December, the highest decline since November, 2004.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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