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Al Rajhi Third-Quarter Net Drops 3.5%, Missing Estimates

Al Rajhi Bank, the largest Saudi Arabian lender by market value, posted a 3.5 percent decline in third-quarter profit, missing analysts’ estimates, as expenses increased.

Net income dropped to 1.87 billion riyals ($499 million) from 1.94 billion riyals a year earlier, the bank said in a statement to the Saudi stock market today. The mean estimate of seven analysts was for a profit of 2.1 billion riyals, according to data compiled by Bloomberg.

Economic growth in Saudi Arabia, the world’s biggest oil exporter, will slow to 6 percent this year from 7.1 percent last year, according to the World Economic Outlook by the International Monetary Fund. Al Rajhi joins Saudi British Bank and Banque Saudi Fransi in missing analysts’ estimates.

“Doing a quick calculation shows that they’ve booked provisions of about 500 million riyals in the quarter, which is quite steep,” Asim Bukhtiar, head of research at Riyad Capital, said in a telephone interview. “Other banks have done that as well, but in the case of Al Rajhi, the leap is huge.”

The nation’s Tadawul All Share Bank Index has gained 0.9 percent in 2012 compared with an advance of 3.8 percent for the benchmark Tadawul All Share Index. Al Rajhi shares fell 1.1 percent to 68.25 riyals in Riyadh before the results were announced. The stock has declined 1.8 percent this year.

Expenses Rise

Operating income climbed 14 percent to 3.64 billion riyals, while profit from funding and investments increased 5.1 percent to 2.41 billion riyals, according to the Al Rajhi statement. Operating expenses increased in the quarter, the bank said, without giving further details.

“Revenue growth was strong, and ahead of market consensus,” said Murad Ansari, Riyadh-based vice president of investment bank at EFG-Hermes Holding SAE. “However, provisioning costs appear to have risen sharply.”

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