Banking sector of Saudi Arabia continued to maintain its sound financial position during Q1, 2012. The policy makers, which comprise the Ministry of Finance, Saudi Arabian Monetary Agency (SAMA), Capital Market Authority (CMA) and other related regulatory entities, have made several notable efforts to improve regulation in the sector.
Recently, SAMA and CMA signed a memorandum of cooperation aimed at "developing a framework for cooperation to achieve a high degree of coordination between them and strengthen oversight of entities subject to their control, each according to its jurisdiction, thereby, leading to the development of the financial sector and enhancing its stability."
The banking sector is playing a vital role in the growth of Saudi economy. Saudi Arabia proved to be a world's fastest growing banking market. With advanced technology and favorable policies by the government, banking system has been able to improve steadily and consistently.
Commenting on the performance of banking sector, Basil Kabbani of Zughaibi & Kabbani Financial Consultants, said: "Despite today's volatile economic environment, proactive measures taken by the Kingdom, regulatory entities and other private bodies have resulted in a largely positive outcome for banks and the country as well. Prevailing political and socioeconomic conditions are absolutely ideal for the present banking system to produce more fruitful results," he added.
However, Saudi banks strengthening their financial position further showed a remarkable performance during Q1 2012.
The Kingdom's 12 major banks generated a total profit of SR9.6 billion in Q1, 2012, reflecting a year-on-year growth of 24 percent. Al-Rajhi Bank and National Commercial Bank represented nearly 41 percent of the consolidated net profit.
Among other players in the sector, Bank Albilad's bottom line grew exceptionally by 821.6 percent from the SR55.5 million recorded in the year-earlier period.
It reported a net income of SR511.5 million for Q1, 2012. The main reason for the growth in net profit for Q1, 2012 compared to same quarter last year is the increase in the income from investing and financing assets, fees and commission income and the bank gained SR373 million as non-operating income (extraordinary) from selling its land.
Net special commission income of three banks - Saudi Investment Bank, Arab National Bank and Samba Financial Group - reduced slightly, while all other banks showed a positive growth of 3 to 51 percent.
Alinma Bank showed a solid growth of 50.7 percent in its income from investing and financing activities.
Al-Rajhi Bank managed to retain a healthy level of income from investing and financing activities. At the end of Q1, 2012, its top line climbed to SR2.3 billion.
Core operating profitability of all the banks improved significantly, Al-Rajhi Bank represented a total operating income of SR3.4 billion for the quarter 2012, an increase of 16.68 percent compared to the same period last year. Samba announced SR1.8 billion for first three months of 2012 compared to SR1.7 billion of last year.
On the other hand, Bank AlJazira recorded a substantial operating income of SR427 million for the three-month period, up 54.7 percent from SR276 million a year earlier, while Alinma Bank's total operating income was SR393 million, recorded a growth of 50 percent amassed in the corresponding period of the preceding year.
As per 12 commercial banks' consolidated balance sheet at end of Q1, 2012, total assets grew exceptionally to SR1.57 trillion, recording a growth of 9.3 percent over the figure of SR1.4 trillion in the corresponding period of the preceding year.
All Saudi banks reflected a positive growth. The main contributor to the increase was the National Commercial Bank (NCB), which represented largest share of SR314 billion, approximately one-fifth of the total assets recorded at the end of Q1, 2012.
On the other hand, Alinma Bank remained at top in terms of percentage growth, achieving 34.7 percent higher value of total assets from SR29.6 billion recorded in the year-earlier period.
Deposits of the sector reached to SR1.19 trillion by March-end 2012, showing a marked increase of 10 percent over the SR1.08 trillion, mainly due to deposit mobilization and expansion of branch networks by banks.
Major contribution in terms of deposits was made by the NCB, representing SR248 billion or nearly one-fifth of the aggregate value of all commercial banks.
Alinma Bank's deposits grew by an impressive 88.5 percent over the March 2011 level to reach SR21.3 billion recorded at the end of first quarter of 2012.
Loans and advances
Saudi banks continued to expand their lending activities. The banks recognized a 14.88 percent increase in loans and advances. Loans reached SR900 billion by March-end 2012 versus SR784 billion a year earlier.
Al-Rajhi Bank represented a funding of SR152 billion for Q1, 2012, contributing 17 percent of the overall value.
Alinma Bank reported total financing portfolio outstanding at March 31, 2012 of SR27.6 billion compared to SR20.4 billion reported in the same period of preceding year. This represented an increase of SR7.2 billion or 35.5 percent.
At Saudi Stock Market, the banking sector has achieved a healthy return nearly 24 percent during Q1. The sector's index surged to 18,064.4 points level, accumulating 3,482.64 points for the quarter.
A large number of investors continued to engage in speculation of banking stocks and took the advantage of high returns by providing a substantial liquidity.
Sector's daily average turnover reached a significant level of SR909 million during Q1, a substantial increase of 206.61 percent compared to SR296.6 million recorded for 2011.
The powerful trading waves expanded the sector's daily average volume to 56.4 million shares, increasing by 197.3 percent over the last year daily average volume of 18.9 million shares.
Banking stocks spent the entire quarter with impressive gains. Positive performance boosted by Bank AlJazira soared up SR12.55 or 74 percent for the quarter.
Alinma Bank also showed a splendid performance, advancing over 66.8 percent to close the quarter at SR15.60.