Saudi Investment Bank (SAIB), which received two rating downgrades in June, said its net profit more than tripled during the third quarter despite a drop in net operating income.

The lender said it made SR203 million ($54 million) in the three months to September 30.

SAIB's earnings performance during the third quarter was the best by any Saudi lender this year amid fears the profitability of Saudi banks will continue to be strained by provisions for possible loan losses linked to troubled conglomerates Saad Group and Ahmad Hamad Algosaibi and Bros Company (Ahab).

Net income from operations over the third quarter decreased by 10.8 per cent to SR370 million, it added. Net lending income, a key component of net income from operations, rose 8.1 per cent to SR240 million, SAIB said.

This means that net income from non-lending operations such as foreign exchange and brokerage fees fell 32.6 per cent to about 130 million riyals, based on Reuters calculations.

SAIB said however that its deposits at the end of September fell 10.7 per cent from a year earlier to 38.41 billion riyals, although this marked an improvement on the 36.36 billion riyals it had by end-June, 2009.

Hesham Abu Jamea, head of asset management at Bakheet Investment Group, said SAIB's third quarter net profit came close to his SR190 million forecast.

"The improvement in SAIB's net profit during the third quarter was expected because they needed less provisions especially for investments abroad compared to the same period in 2008 after the recent improvement in international markets," he told Reuters.

Last year, SAIB booked about SR968 million in provisions to cover losses on investments, leading it to post its lowest net profit in at least four years.

"SAIB will also need to make less provisions for bad loans during the third quarter after they booked some SR55 million for the second quarter of 2009," Abu Jamea added.

Bakheet Investment Group expects SAIB to post a net profit of SR208 million during the fourth quarter of 2009 compared with a net loss of SR90.7 million for the same period of 2008, Abu Jamea said.

SAIB did not give details about the level of provisions at the end of September. It said that a 4 per cent annual rise in its net profit during the nine-month period to end-September stemmed from "return on investments and an improvement in the retrun on assets ratio".

The loans portfolio stood at SR30.53 billion by end-September against SR29.87 billion a year earlier and SR30.15 billion by end-June, 2009.

Fitch has downgraded SAIB's individual rating to 'C/D' from 'C' citing "concerns about SAIB's asset quality, particularly because of its high borrower concentrations in a slowing economy".

Standard & Poor's on June 2 revised its outlook on SAIB to negative from stable to reflect "a weakening in the bank's profitability as well as potential deterioration of its financial profile that could result from an increase in nonperforming loans and provisioning needs".

According to Saudi bourse data, JP Morgan International Finance Ltd holds a 7.4 per cent stake in SAIB which in turn holds a 50 per cent stake in American Express Saudi affiliate. – Reuters