Al Rajhi's third-quarter profit rises 15% on higher income and lower provisions

Impairment charges decreased 18% to $131m in the three-month period to the end of September

ATM machines at Al Rajhi Bank in Riyadh. The lender reported a 15% increase in third quarter net profit. Bloomberg

Al Rajhi Bank, Saudi Arabia’s second-largest lender by assets, reported a 15 per cent increase in third quarter profit as total operating income rose and provisions for expected losses declined.

Net profit for the three months to the end of September rose to about 4.4 billion Saudi riyals ($1.1bn), up from 3.8bn riyals in the same quarter of 2021, the bank said on Sunday in a statement to the Tadawul stock exchange, where its shares are traded.

Total operating income for the period rose nearly 10 per cent to 7.2bn riyals.

Net income jumped due to a rise in total operating income spurred by an increase in net financing and investment income, fees from banking services and exchange income, while there was a decrease in other operating income, the lender said.

Net income from special commissions, financing and investments for the third quarter rose 9 per cent year-on-year to 5.7bn riyals, while impairment charges decreased 18 per cent to 490 million riyals ($131m) in the three-month period to the end of September.

Total operating expenses for the third quarter rose 6 per cent to 1.86bn riyals due to an increase in salaries and employees’ benefits, and depreciation expenses, though other general and administrative expenses decreased, the bank said.

Lenders in the GCC's four biggest banking markets — the UAE, Saudi Arabia, Kuwait and Qatar — are expected to “almost reach” pre-pandemic profitability levels by the end of 2022 on high oil prices, rising interest rates and new public projects, according to S&P Global Ratings.

The financial performance of the kingdom's lenders has “almost” recovered to pre-Covid levels on stronger economic growth and higher interest rates, S&P said in a report last month.

Credit growth momentum will continue into the second half of 2022 due to stronger-than-expected performance in the mortgage portfolio, while corporate lending will start contributing to loan growth.

“The gradual increase in interest rates will continue to feed Saudi banks' margins, eventually pushing them up by year-end,” S&P said.

Al Rajhi Bank's net profit for the nine-month period rose 19 per cent year-on-year to 12.8bn riyals as total operating income increased 13 per cent to about 21bn riyals and provisions fell 6 per cent to 1.64bn riyals.

The bank's total assets grew 27 per cent in the third quarter, compared to the same period last year, to 740.6bn riyals, while investments rose 24 per cent to about 102bn riyals.

Customer deposits increased about 16 per cent annually to almost 556bn riyals during the nine-month period, the statement said.