Saudi Arabia's banks surge in the first quarter

The biggest banks in Saudi Arabia have reported strong earnings for the first quarter, spurred by government spending plans and a bull market in local stocks.

Al Rajhi Bank, the region's biggest lender by market capitalisation, topped analysts' estimates with an 18.3 per cent increase in quarterly income to 2.01 billion Saudi riyals (Dh1.96bn), compared with the same period last year.

Banque Saudi Fransi generated a profit of 789 million riyals, a 10 per cent increase on the same period a year earlier.

Saudi British Bank, which is 40 per cent controlled by HSBC, reported quarterly earnings of 854m riyals, a 13.7 per cent increase over the corresponding period a year earlier.

Meanwhile, Saudi Hollandi Bank's quarterly profit grew 21.9 per cent compared with a year earlier to 290m riyals.

A substantial run-up in the value of Saudi stocks was expected to provide a big boost to the kingdom's financial services sector, analysts from Deutsche Bank wrote in a research note.

"We expect Saudi banks' earnings to rise 30 per cent quarter-on-quarter and 24 per cent year-on-year, benefiting from improved brokerage income, encouraging system volume trends, and benign asset quality," the report said.

The Saudi Tadawul All-Share Index surged 22 per cent during the first quarter of this year, as speculation mounted that the kingdom's capital markets could be opened to international investors.

At present, global investors have access to Saudi stocks only via an unpopular regime of swap agreements that does not directly track the underlying securities.

Daily traded values of stocks on the kingdom's exchange reached highs of $5.7bn during the first quarter. Saudi shares have sunk 4.5 per cent since the start of the month.