While the global financial crisis unfolded, Saudi Arabia maintained its conservative monetary policy had in effect shielded local banks from the effects of toxic foreign debt instruments.
Then defaults by the Saad Group and Ahmad Hamad Algosaibi & Brothers , two large family-owned Saudi conglomerates, revealed debts of $20bn were owed to international and local lenders. Saudi banks were estimated to have an exposure of $5bn-$7bn.
Officials again played down the importance of this, but fourth-quarter performance suggests the full magnitude of troubled debts, not just those of the two families, is beginning to be felt. Collective profits of 11 listed banks declined 8.6 per cent to SR22.22bn ($6bn) in 2009, with many citing credit provisioning and sluggish lending, according to National Commercial Bank. Analysts estimate non-performing loans at about 3 per cent in 2009.
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