UPDATE 2-Saudi SABB Q2 net falls 15 pct on provisions

* SABB doubles provisions for loans

* Deposits up yr/yr, but down qtr/qtr (Recasts, adds details throughout on second-quarter results)

RIYADH, July 15 (Reuters) - HSBC's (HSBA.L) Saudi affiliate SABB bank 1060.SE said second-quarter profit fell 15 percent after it doubled provisions for possible credit losses amid concerns over the solvency of some debt-laden family businesses.

SABB, in which HSBC holds a 39.9 percent stake, made a net profit of 676 million riyals ($180.3 million) in the three months to June 30 against 795 million riyals a year earlier, it said in a statement on the Saudi bourse website.

The average forecast of three analysts surveyed by Reuters was 697 million riyals. [ID:nL5593096]

SABB attributed the fall to "the bank's conservative policy."

"SABB's strong operating income streams have allowed the bank to report robust profits for the first half of 2009 despite a 246 million riyals increase in provisions for possible credit losses," managing director Richard Groves said in a statement.

According to its audited report, SABB made a provision for possible credit losses of 116.3 million riyals in the first quarter. Based on Groves statement, the bank increased this provision by 129.7 million riyals in the second quarter.

Like other Saudi lenders, the bank did not say whether it was exposed to troubled Saudi family firms Ahmad Hamad Algosaibi and Bros Group (AHAB) and Saad Group [SAADG.UL].

Saad Group's Chairman Maan al-Sanea, who had his accounts frozen by the central bank in May, is one of HSBC's top shareholders.

Dubai-based Shuaa Capital said SABB's earnings reflect "tighter risk-averse strategy in a difficult operating environment."

"(This is) accentuated by the bank's necessity to meet with regulatory requirements in terms of capital adequacy, given its low tier 1 relative to peers," Shuaa said, noting that this pattern could prevail over the rest of 2009.

SABB's rivals Al-Rajhi Bank 1120.SE and Banque Saudi Fransi 1050.SE both reported provisions in their results this week.

The bank said it would pay a mid-year dividend of 0.83 riyals out of earnings per share of 1.91 riyals earnings per share realised at the end of June. Earnings per share stood at 2.07 riyals in the first half of 2008.

SABB's operating profit rose 4 percent to 1.38 billion riyals and net lending income rose 9.3 percent to 894 million riyals, the bank said. Based on Reuters' calculations, this means that net income from non-lending operations fell 8.6 percent to 489 million riyals in the second quarter.

The value of SABB's investments fell 18.9 percent in the first half to 24.4 billion riyals compared with the same period last year, and assets slid 3.3 percent to 122 billion riyals.

Its loan portfolio at the end of June rose 1.5 percent from a year ago and down 0.8 percent from the first-quarter of 2009. Deposits grew 2.7 percent from a year earlier but were down 5.3 percent from the first-quarter of 2009.

On Tuesday, Banque Saudi Fransi, an affiliate of France's Calyon, posted a 10.6 percent drop in second-quarter profit. [ID:nLE555256] (Reporting by Ulf Laessing and Souhail Karam; Editing by Gary Hill)