Saudi Banks Drop Most This Month on Al Rajhi Net: Riyadh Mover

Saudi Arabia’s bank index fell the most in almost a month as second-quarter profit at the kingdom’s largest lender missed analysts’ estimates.

The Tadawul All Share Bank Index dropped 0.9 percent, the most since June 24, to 16,841.49 at the close in Riyadh. Al Rajhi Bank, which has the biggest weighting on the broader measure, retreated 1.6 percent, also the most since June 15. The benchmark Tadawul All Share Index declined 0.2 percent.

Al Rajhi’s second-quarter profit was 2.12 billion riyals ($570 million), missing the average estimate of 10 analysts for a profit of 2.16 billion riyals, according to data compiled by Bloomberg. The bank’s shares have advanced 3.1 percent in the past year, lagging a rally of 15 percent for the Tadawul and a gain of 12 percent for Samba Financial Group.

The quarterly result is “a negative read as core operation performance deteriorates and as the bank’s balance sheet growth uncharacteristically lags the sector’s,” Jaap Meijer, director of equity research at Dubai-based Arqaam Capital Ltd., said in an e-mailed note to clients. “Asset quality appears to be improving, but we are skeptical about Al Rajhi’s ability to sustain such low loan-loss charges.”

Arqaam Capital, which has a hold rating on the stock, estimated Al Rajhi’s loan-loss provision charge was 78 basis points of net loans, compared with 107 basis points in the first quarter and 96 basis points in the second quarter of 2012. The bank didn’t provide full financial results yesterday.

Samba, the second-biggest member of the Saudi bank index after Al Rajhi, fell 1.5 percent, the most since June 15, to 50.25 riyals. The lender posted a 1.5 percent increase in second-quarter profit, meeting analysts’ estimates. “Today’s sell-off is due to a combination of a Ramadan slowdown and low liquidity as well as relatively weak results from Al Rajhi,” Mahmood Akbar, an analyst at Riyadh-based NCB Capital, said in an e-mailed response to questions. “We are also seeing some profit taking just before the weekend in case of unexpected increase in geopolitical risks or weak data from the U.S.”

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