GulfBase GCC Cap Indices
IndexLevelChg%
Large Cap3,958 0.85
Med Cap3,943 0.35
Small Cap5,129 0.41
Micro Cap8,650 0.61

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Ticker Price Volume
QNBK 147 119,837
SABIC 95.89 2,447,604
WARBABANK 265 805,745
GFH 0.72
AGLTY 650 2,407,748
EMAAR 7.25 3,887,625
MMG 12.55

Market Review and Outlook

Source: NCB Capital

Saudi Macro and Equity Market

Credit Provisions “What Lies Beneath”

The eleven locally incorporated banks in KSA, excluding Alinma bank, might have faced the financial crisis in a resilient mode, but the credit provisioning cycle in 2009 raised questions about what lies ahead for Saudi banking. In our opinion a closer insight into non-performing loans (NPLs) and specific provisions that are allocated to such delinquent loans will help detect the major trends going forward. For the nine banks that issued their detailed FY2009 financial statements, the most affected were small and medium sized banks, notably Arab National Bank, Saudi Investment Bank, Al Bilad, and Saudi Hollandi Bank (SHB), reporting a staggering increase in their NPLs by 549%, 506%, 522% and 110%, respectively. The major sources of trouble for each bank were notably: (1) manufacturing for SHB with a substantial nine fold increase, (2) services and manufacturing for ANB, (3) commerce for SAIB, and (4) manufacturing for Bilad. As expected this sudden surge in NPLs forced these banks to allocate more specific provisions that ranged between SHB’s 127% and SAIB’s 69% increase. In contrast, NCB and Riyad Bank, two of the largest banks in KSA, did report lower NPLs, at -21% and -1%, and in turn reduced their allocations for specific provisions. The apparent aspect of such analysis does point to the relative weakness of smaller banks, and their vulnerable standing at times of stress. Yet, taking into consideration portfolio provisions, which represent additional allocations above the specific provisions, the overall standing of Saudi banks remains healthy, with the NPL coverage ratio at an acceptable 96%.

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