Saudi National Bank’s first-quarter net profit rises 12% on higher operating income

Kingdom’s largest lender says its 9.88% shareholding in Credit Suisse will convert to approximately 0.5% share in UBS upon completion of the merger

SNB's net profit for the three months to the end of March reached $1.33 billion. Reuters

Saudi National Bank, the largest lender in Saudi Arabia by assets, reported a nearly 12 per cent increase in its net profit for the first quarter of 2023, driven by higher operating income, as the kingdom's economy continues to post strong growth.

Net profit for the three months to the end of March reached five billion Saudi riyals ($1.33 billion), from 4.5 billion riyals in the same period last year, the lender said in a filing on Monday to the Tadawul Stock Exchange, where its shares are traded.

Total operating income improved by eight per cent to 8.7 billion riyals, driven by an increase in net income from special commissions and financing, and investments driven by margin and balance sheet expansion, SNB said.

Reflecting on the impact on its first-quarter earnings from SNB’s investment in Credit Suisse from the merger with UBS, the Saudi Arabian lender said its shareholding in Credit Suisse of 9.88 per cent will “convert into a shareholding in UBS of approximately 0.5 per cent upon completion of the merger”.

SNB had acquired a 9.88 per cent stake in Credit Suisse in October 2022 for 5.5 billion riyals as a financial investment allocation within the Saudi bank's investments portfolio.

As of December 31, SNB’s investment in the Swiss lender had declined by approximately 20 per cent, with a further drop recorded in the January to March period.

“The financial impact on SNB’s balance sheet was a decline in the Credit Suisse investment carrying value by approximately 70 per cent during the first quarter (the carrying value of the Credit Suisse investment as at March 31, 2023 was 1.3 billion riyals),” it said.

However, SNB last month said its growth plans and profitability were unaffected by the lower valuation of its investment in Credit Suisse.

The disclosure followed UBS’s announcement on March 20 to buy Credit Suisse in an all-share deal for $3.2 billion as part of a state-backed rescue deal.

Also last month, SNB appointed Saeed Al Ghamdi as its new chairman, following the resignation of Ammar Al Khudairy due to “personal reasons”.

Total operating expenses before provisions for credit and other losses were stable at 2.4 billion riyals in the first three months of this year. Hence, cost-to-income ratio improved year-on-year, SNB said.

The lender’s overall balance sheet expanded by 3 per cent in the first quarter, compared to December 31.

This was mainly driven by a 4 per cent growth in financing, 3 per cent growth in retail principally from 4 per cent mortgages growth and 4 per cent wholesale financing growth, it said.

The bank has also “maintained healthy capitalisation levels and a strong liquidity position”, it said.

However, SNB’s net impairment charge for expected credit losses increased by 28 per cent annually to 493 million riyals for the January to March period.