UPDATE 2-Arab Bank 9-mth net profit down on higher provisions

* 9M net profit $500.9 million vs $672.8 million yr ago

* Bank put aside $54.6 million in Q3 for provisions

* Total provisions $742 million at end-September (Adds more figures and analyst comments)

AMMAN, Nov 2 (Reuters) - Arab Bank's ARBK.AM net profit fell 25 percent in the nine months to September after it increased its bad loan provisions in the third quarter, according to financial statements seen by Reuters.

The statements still need final approval from the Central Bank of Jordan before they are released.

Most Jordanian banks are setting aside higher provisions to cover possible defaults and non-performing loans by businesses and real-estate firms reeling from the impact of the global downturn on the aid-dependent economy.

Arab Bank, one of the Middle East's major financial institutions, put aside $54.6 million in provisions for non-performing loans in the third quarter, pushing up total provision at Sept. 30 to $742 million from $647.5 million in the same period last year.

The bank's nine-month net profit fell to $500.9 million from $672.8 million a year ago.

Bankers said while the credit provisions weighed on profits, the Arab Bank was cushioned by a healthy capital base and $8 billion of shareholders equity.

"The size of the provisions booked for Q3 is acceptable compared to its regional and international peers," said Tareq Yaghmour, head of research and investment at Capital Bank.

Arab Bank said in June that it was exposed to troubled Saudi Arabian groups Saad [SAADG.UL] and Al Gosaibi but that it would not affect its financial position.

The statement showed that the assets of Arab Bank Group, which includes Arab Bank Switzerland based in Zurich, rose to $49.56 billion in the first half of the year against $45.63 billion at the end of the year. Arab Bank is one of the few Jordanian banks active in global financial markets. Most banks in the family-dominated Arab region are shielded from exposure to Western markets by modest risk profiles and offering only relatively plain products.

Bankers said that as long as few economic recovery signs emerge, Arab Bank and other financial institutions in the region will continue to book provisions to cover anticipated defaults, though not at the same high levels they have put aside since the start of the year.

"They (the banks) have cleaned up their balance sheet but until we see signs of a recovery and the lending machine picks its difficult to see a return to growth in profitability," said Rasha Manna, investment banker at Jordaninvest, an investment firm.

Deposits rose to $30.9 billion by end of September 2009 against $28.58 billion at end of last year.

The bank's total outstanding loan portfolio fell to $22.4 billion in the first nine months of the year against $22.5 billion in the same period last year.

The bank, whose geographic diversification has helped it weather turmoil in the past, saw its net revenue drop to $1.344 billion in the first nine months of 2009 against $1.406 billion in the same period last year.

The firm is one of the Arab world's largest privately owned banks, with nearly 20 percent owned by the family of Lebanon's former prime minister, Rafik al-Hariri, who was assassinated in 2005, and a similar size stake held by Jordan's social pension fund. The rest is mainly held by long-term investors.

Arab Bank owns 40 percent of Saudi Arabia's Arab National Bank ANB 1080.SE. ($1 = 0.709 dinar) (Reporting by Suleiman al-Khalidi; editing by Karen Foster)