Saudi Investment Bank (SAIB), which received two rating downgrades last month, said its net profit fell 32.8 percent in the second quarter and showed a rare drop in customer deposits.

SAIB is the first Saudi bank to post a decline in deposits in several years.

The lender made 188 million riyals ($50.13 million) in the three months to June 30, down from 280 million riyals in the year-earlier period, it said in a statement posted on the bourse website.

Earnings per share were 0.95 riyal at the end of the June down from 1.20 riyal a year earlier.

"The decline in net profit is mainly due to to a decrease in banking fees," said SAIB, one of Saudi Arabia's smallest lenders by market value. Banking fees include brokerage commissions.

SAIB said net operating income fell 41 percent to 361 million riyals after net lending income slid 25 percent to 263 million riyals.

Deposits at the end of June were at 36.36 billion riyals, down from 36.86 billion riyals a year earlier and 38.04 billion riyals at the end of March 2009.

Saudi banks have shown significant signs of risk-aversion especially after September 2008 due mainly to fears over the repercussions of the global financial crisis on private firms.

But liquidity has never been an issue as evidenced by a growth in banks' deposits with the central since then despite repeated cuts of the reverse repo rate.

Majed Mohamed Khalil, deputy head of finance at SAIB, told Reuters: "SAIB had enough liquidity and did not need additional deposits." - Reuters