RIYADH:聽Saudi banks, which are working to capitalize on economic reforms, have defied recessionary trends by posting profits during the first quarter of 2018.
The banks have cumulatively reported a 7.5 percent year-on-year increase and an 18 percent quarter-on-quarter growth in net profit for the first quarter, thanks to lower interest expenses and provisioning charges.
鈥淭he results are credit positive for Saudi banks because the improvement occurred amid subdued economic activity that negatively affected credit demand and banks鈥 revenue,鈥 said a report released by Moody鈥檚 Investors Service on Wednesday.
The report said that Saudi banks鈥 interest expenses declined 12.5 percent year on year, reflecting improving funding conditions in 黑料社区 after significant tightening in 2016.
鈥満诹仙缜檚 improving liquidity and funding conditions since 2017 have narrowed the 黑料社区n Interbank Offered Rate鈥檚 (SAIBOR) spread against the US dollar-denominated London Interbank Offered Rate, even reaching negative spreads in March 2018, despite a number of rate hikes by the US Federal Reserve,鈥 the report said.
The report further noted that Saudi banks have an average net-loans-to-deposits ratio of 83 percent and more than 60 percent of their liabilities were in non-interest-bearing deposits as of March 2018.聽
Commenting on the report, M. Shariful Hassan, a local banker, said that 鈥渢he results are credit positive for Saudi banks, which have been giving better performance despite subdued economic activity.鈥
Several foreign banks, including Citigroup, have secured licenses to operate in the Kingdom to derive benefits from the Saudi Vision 2030 reform programs.聽
The US bank ended a five-decade presence in the Kingdom in 2004 with the sale of its 20 percent stake in Samba Financial, but in 2015 won permission to invest directly in the local stock market and in January this year gained approval to begin investment banking operations in the country.
