Saudi Arabia’s SABB reports lower first-quarter profit on higher provisions and expenses

Net profit of the lender slides to 1.02bn riyals

Assets of the Saudi British Bank rose 52.62 per cent year-on-year to 265.2bn riyals. Michael Bou-Nacklie / The National

Saudi British Bank (SABB), the kingdom's third-biggest lender by assets, reported a 7.5 per cent drop in its first-quarter net profit due to higher operating expenses and an increase in provisions for expected credit losses.

Net profit for the three months ending March 31 declined to 1.02 billion riyals (Dh998m), compared to 1.11bn riyals during the same period in the prior-year, the lender said in a statement on Sunday to the Tadawul stock exchange, where its shares trade. Total operating expenses climbed 64 per cent to 1bn riyals while provision for expected credit losses rose almost three-fold to 254 million riyals.

“Decrease in net profit was primarily driven by an increase in total operating expenses as result of integration activities relating to the merger with Alawwal Bank and an increase in provision for expected credit losses,” the bank said.

SABB merged with its competitor Alawwal in June to create a financial entity with more than $73bn (Dh268bn) in assets. Earlier this year, the bank appointed Lubna Suliman Olayan as chairwoman and Hassana Investment Company's Saad Abdul Muhsin Al-Fadhli as its vice-chairman for three-year terms.

The bank's total operating expenses during the current quarter included 95m riyals of merger integration costs, compared to 58m riyals during the same period last year. But these costs were largely offset by a rise in operating income, driven by a 32.4 per cent increase in net special commission income, SABB added.

Net income from special commissions and investments rose to 1.97bn riyals during the period, compared to 1.49bn riyals during the same period last year.

SABB also said it rolled out an initiative to support retail customers working in the healthcare sector by deferring repayments on lending facilities for three months during the current quarter in the wake of coronavirus pandemic. The bank also postponed repayments on eligible lending facilities for six months as part of Saudi Arabian Monetary Authority (Sama)’s Private Sector Financing Support Programme that was launched in March to support businesses affected by the pandemic

“The net impact to the bank of both programmes was a net loss of 76m riyals as at March 31 2020 and this has been presented as part of other operating Income,” the lender said.

The bank's investments climbed 54 per cent to 60.5bn riyals while customer deposits also increased 48 per cent to 188.3bn riyals.

Saudi Arabia last week adopted various cost cutting measures such as suspension of the cost of living allowance and tripling VAT to offset the impact of the coronavirus pandemic on its economy and shore up its finances.

It also adopted various measures to relieve some of the strain on companies whose businesses have been hit by the coronavirus. The kingdom has already announced measures worth 120bn riyals to boost the economy, including 50bn riyals dedicated to support small and medium-sized enterprises.