UPDATE 1-Banque Saudi Fransi's Q2 profit falls on provisions

(Adds details, background, shares)

By Asma Alsharif

RIYADH, July 14 (Reuters) - Banque Saudi Fransi 1050.SE, the Saudi affiliate of France's Calyon, posted a 10.6 percent drop in second-quarter profit, below analysts expectations, as it booked provisions.

Saudi Arabia's fourth-largest bank by market value made a net profit of 692 million riyals ($184.5 million) in the three months ending June 30, 2009 against 774.1 million riyals in the year-earlier period, it said in a statement.

Two analysts surveyed by Reuters had expected net income of 728.5 million riyals on average. [ID:nL5417602]

"The reason for the net profit decline is due to the conservative policy of the bank and a rise in the lending portfolio," the bank said in a statement on the bourse website, adding that operational income had improved compared with the first quarter.

Like other major 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].

The bank said it had taken provisions and "taken into consideration the prevailing market conditions".

Net commission income rose 23 percent to 757 million riyals in the quarter, while the loan portfolio gained by 7.1 percent in the first six months to 81 billion riyals.

Operating profit increased 2 percent in the second quarter to 1.1 billion riyals. Deposits rose 6 percent to 90 billion riyals, while assets rose 7 percent to 123 billion riyals.

The value of investments declined 3.9 percent to 19.6 billion riyals in the first six months. It gave no quarterly data.

The bank's shares rose 1.5 percent on Tuesday, while the main index .TASI ended up 2.4 percent. Results were released after markets closed.

Calyon is the investment banking arm of French retail bank Credit Agricole (CAGR.PA). (Reporting by Asma Alsharif; Editing by Ulf Laessing, Riyadh newsroom, asma.alsharif@thomsonreuters.com) ($1=3.750 Saudi riyals)