NCB reports 24 per cent increase in second quarter profits

Jeddah bank reported a net profit of 2.69bn Saudi riyals

National Commercial Bank is expected to further extend its lead as the largest bank in Saudi Arabia after the merger with Samba Financial Group. Michael Bou-Nacklie / The National

Saudi Arabia’s National Commercial Bank (NCB) reported a 24 per cent year-on-year increase in net profit for the second quarter of the year on the back of growth in operating profit and a reduction in costs as loan impairments declined.

The Jeddah bank reported a net profit of 2.69 billion Saudi riyals (Dh2.63bn) in the three months ending in June, largely in line with analysts’ estimates. Total revenue for special commissions and investments increased by about 8 per cent to 4.78bn Saudi riyals.

“Higher net income derived from higher total operating income and lower operating expenses,” the lender said in a statement to the Tadawul stock exchange, where its shares trade.

NCB, which is Saudi Arabia’s biggest bank by assets, said operating income increased 8.5 per cent because of the rise in net special commission income, as well as higher income from banking services fees and from foreign exchange services.

Operating expenses, meanwhile, dropped 1.9 per cent due to a fall in impairment charges on loans, as well as a decline in “rent and premises-related expenses and salaries and employee-related expenses”.

During the six-month period to June 30, net profit increased by about 15 per cent year-on-year to 5.46bn riyals, as total revenue for special commissions and investments rose 11 per cent to 9.65bn riyals.

Loans and advances made by the bank increased by about 4 per cent to 276.27bn riyals, while customer deposits rose 3 per cent to 327.44bn riyals.

"We estimate that [interest rate] spreads had widened sequentially on lower cost of funds, likely due to the decline in Saibor [Saudi interbank offer rates]," said EFG Hermes banking analyst Shabbir Malik about NCB's results.

“Deposit growth outpaced loan growth, which helped improve balance sheet liquidity,” he added, stating that the bank’s loan-to-deposit ratio improved to 84.4 per cent, up from 86.8 per cent at the end of the first quarter.

NCB’s shares were up 0.37 per cent by 12.02pm UAE time on Wednesday, to 54.7 riyals per share, and are up 14 per cent since the start of this year,

The bank is in merger talks with Riyad Bank, which on Tuesday announced a 78 per cent increase in its second-quarter profit as impairments fell.