UPDATE 1-SABB says covers bad loans, will book more reserves

Sun Apr 17, 2011 6:10am EDT

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* Bad loans represent 3.9 pct of total loans portfolio

* Bank to continue booking reserves in 2011

(Adds details, background, share price)

By Asma Alsharif

RIYADH, April 17 (Reuters) - HSBC's Saudi affiliate SABB bank 1060.SE said it covered 100 percent of its bad loans and will continue to book reserves in 2011, an executive said on Sunday.

"There is no doubt that at the end of last year we reached our full reserves for the bad loans and the level will continue this year," the bank's Chief Risk Officer Alaa Jabri told Alarabiya television in an interview.

"Bad loans represent 3.9 percent of the total loans portfolio," he said, adding that the bank will continue to cover them by over 100 percent this year."

Banks in top oil exporter and biggest Arab economy suffered last year as they took provisions for bad loans to cover a fallout from family firms, which hit profits and slowed lending.

The Saudi central bank said in October last year that Saudi banks should be more conservative and cover more than 100 percent of their non-performing loans.

SABB reported a 20 percent rise in its net profit for the first-quarter earlier in March, and made no reference to provision taking. [ID:nLDE73A1KV]

The lender made 751 million riyals ($200 million) in the three months to end March, compared to 621 million riyals in the same period a year earlier, beating analyst forecasts.

Analysts expect Saudi banks to perform better in 2011 after they cut down on provisions and begin to lend more as the country is undergoing multi-billion dollar infrastructure projects.

SABB's shares fell 2.3 percent to 43 riyals a share by 0955 GMT, underperforming Saudi Arabia's .TASI bourse website which eased 0.8 percent. (Reporting by Asma Alsharif; Editing by Jason Benham and Mike Nesbit)

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