Al Rajhi Bank (RJHI), the biggest Saudi Arabian lender by market value, posted a 0.6 percent increase in fourth-quarter profit, missing analysts’ estimates.
Net income advanced to 1.911 billion riyals ($510 million) from 1.899 billion riyals a year earlier, the bank said in a statement to the Saudi stock market today. The mean estimate of 11 analysts was for a profit of 1.97 billion riyals, according to data compiled by Bloomberg.
Saudi Arabian lenders have benefited from demand for bank credit amid an economic growth of 6.8 percent last year and government spending plans of $500 billion. Lending growth of 15 percent in October, the highest in almost four years, helped Saudi British Bank and Banque Saudi Fransi (BSFR) beat profit estimates in the fourth quarter.
“We expected revenues to continue benefiting from strong loan growth trends, which should feed into higher net interest income as well as non-interest income,” Murad Ansari, an analyst at EFG-Hermes Saudi Arabia, said in an e-mailed response to questions before the results were published. EFG-Hermes had forecast earnings of 1.99 billion riyals.
Shares of Saudi banks underperformed the benchmark index last year and third-quarter net missed estimates as rising provisions against bad loans from construction companies eclipsed the fastest loan growth in three years. The Tadawul All Share Bank Index rose 0.4 percent in 2012, compared with a 6 percent gain for the Tadawul. Al Rajhi shares tumbled 6.5 percent in the period.
Al Rajhi plans to offer more mortgages this year and step up loans to small and medium enterprises and project finance to diversify its portfolio, Chief Executive Officer Sulaiman Al Zaben said in December. The bank expects growth in lending this year similar to 2012, he said.
Saudi Arabia approved its first mortgage law last July after more than a decade of debate. Home lending soared 83 percent to 48 billion riyals year on year in the second quarter, the highest on record according to the latest central bank data.
Al Rajhi said operating income in the fourth quarter increased 5 percent to 3.5 billion riyals, while lending rose 23 percent to 172 billion riyals. Deposits advanced 24 percent to 221 billion riyals as of Dec. 31, the bank said.
The shares closed 1.8 percent higher at 69.5 riyals in Riyadh trading today.
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