Saudi banks’ profits increased 10-fold in Q2 2021, hike 111% in H1 2021

Saudi Arabia’s listed banks achieved strong results in the second quarter (Q2) and the first half (H1) of 2021 in terms of net profits.

According to banks financial statements on the Saudi Tadawul website, profits of listed Saudi banks increased by 1050.2% during the second quarter of 2021, doubling their profits by more than 10-fold during that period compared to the second quarter of 2020.

And 10 banks listed in the sector achieved net profits during the second quarter of 2021 worth SAR 11.06 billion after zakat and tax, compared to consolidated profits of only SAR 962 million in the same quarter of 2020, knowing that Q2 2020 witnessed sharp non-recurring losses of the Saudi British Bank (SABB) worth SAR 6.87 billion.

The consolidated profits of Saudi banks increased by SAR 10.1 billion during the second quarter of 2021 compared to their profits in the same quarter last year.

Eight of the 10 banks recorded an increase in their net profits during Q2 2021 year-over-year, on the other hand, one bank witnessed a decrease in profits, in contrast to a decrease in the profits of one bank and the transformation of another bank to profitability.

Al-Rajhi Bank

Al-Rajhi Bank topped the list of Saudi banks at the level of net profits during the second quarter of 2021 on an annual basis, as it achieved SAR 3.6 billion of profits, after recording an annual growth of about 48%, thus acquiring 32.6% of the total net profits of Saudi banks in that period.

Saudi National Bank

The Saudi National Bank (SNB) came in second place, with a net of 2.12 billion riyals, after achieving the lowest annual growth rate among the banks listed in the sector by 1.4%.

Riyad Bank

Riyad Bank was the third-highest bank in profits, with a net profits of SAR 1.51 billion, recording an annual increase of more than 42%.

Arab National Bank

The only decline in profits was for the Arab National Bank by about 2.7% on an annual basis, achieving a net profit of SAR 473 million.

Saudi British Bank

While the positive transformation of Saudi British Bank (SABB) with a net profit of SAR 919 million pushed it to rank fourth on the ladder of the ranking of the highest Saudi banks in terms of profitability in the second quarter of 2021.

Banque Saudi Fransi

Banque Saudi Fransi achieved the highest growth rate in quarterly profits during the second quarter of this year, with an increase of 76.2% year-over-year, achieving profits of SAR 770 million after zakat and tax, ranking it fifth among banks in terms of profits.

Saudi Banks performance in H1 2021

The profits of Saudi banks during the first half of 2021 jumped by 111.1% on an annual basis, with an increase of SAR 12.14 billion over the same period last year.

The net profits of Saudi banks in the first half of this year amounted to more than SAR 23 billion after zakat and tax, compared to SAR 10.92 billion in the first half of 2020.

Al-Rajhi Bank topped Saudi banks at the level of profits in the first half of 2021; With a net of SAR 6.94 billion, recording an annual increase of 44.1%, accounting for 30.1% of the banks’ consolidated profits during that period.

SNB came in second place after recording a growth of about 12.3%, achieving SAR 5.53 billion, which constitutes 23.96% of the consolidated net profits.

The Saudi Investment Bank Alistithmar Capital recorded the lowest profits during the first half of 2021 with a value of SAR 501.3 million, followed by Bank Al-Jazira with a net profit of SAR 572.8 million.

Fitch revises outlook for 6 Saudi banks to stable

Fitch Ratings has revised six Saudi banks’ Outlooks to Stable from Negative and affirmed the Foreign Currency and Local Currency Long-Term Issuer Default Ratings (IDRs) at ‘BBB+’.

The banks are Arab National Bank (ANB), Banque Saudi Fransi (BSF), Alinma bank (Alinma), Saudi Investment Bank (SAIB), Bank Aljazira (BAJ) and Gulf International Bank – Saudi Arabia (GIB SA).

The rating actions follow a similar action on Saudi Arabia’s sovereign rating on 15 July 2021, as the rating firm revised Saudi Arabia’s Outlook to Stable and affirmed it at A investment grade.

According to Fitch, ANB’s, BSF’s, Alinma’s, SAIB’s, BAJ’s and GIB SA’s IDRs are driven by sovereign support, as reflected in the banks’ SRFs of ‘BBB+’, which are in line with Fitch’s Domestic-Systemically Important Bank (D-SIB) SRF of ‘BBB+’.

This is applied to all Saudi banks, reflecting Fitch’s view of a high probability of support for all the country’s lenders from the Saudi authorities, if needed.

Fitch’s assessment considers the authorities’ strong ability to support the banking system, given large, albeit reduced from their historical levels, external reserves. It also reflects a long record of support for Saudi banks, irrespective of their size, franchise, funding structure and level of government ownership. We see high contagion risk among domestic banks given that the market is fairly small and interconnected. We believe this is an added incentive for the state to support any Saudi bank, if needed, to maintain market confidence and stability.

The Stable Outlook on these banks’ Long-Term IDRs reflects that on the Saudi sovereign rating.

The report said that downgrade of BSF’s, ANB’s, Alinma’s, SAIB’s, BAJ’s and GIB SA’s Long- and Short-Term IDRs would be driven by a downward revision of these banks’ SRFs.

It said that it is unlikely that Saudi Arabia authorities would stop supporting the Kingdom’s banking system.

Saudi Arabia is an FSB/G20 member country. Bankruptcy legislation has been introduced, followed by resolution legislation in 4Q20. However, Fitch does not believe the authorities will use this over sovereign support.

An upgrade of the banks’ Long-Term IDRs could come from an upward revision of their SRFs, although this is unlikely given our view of the already high creditworthiness and high propensity of Saudi Arabia to support the banking system and the banks, as well as the Stable Outlook on the sovereign.

The banks’ National Ratings are sensitive to a change in their Long-Term Local-Currency IDRs and the bank’s creditworthiness relative to other Saudi Arabian issuers’.

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