Al Rajhi Bank, Saudi Arabia's second-largest listed lender, posted a 1.8 per cent drop in its fourth-quarter net profit, marking the sixth straight drop in quarterly profit for the sharia-compliant institution.

The bank was the third lender from the kingdom to miss analyst forecasts for the fourth-quarter, underlining a mixed performance for banks in the Gulf's largest economy.

Saudi lenders are facing strong headwinds as net interest income comes under pressure from weakening loan growth and fierce competition, especially in the retail market. Analysts also warn that a prolonged slump in oil prices could dent confidence in the banking sector.

Al Rajhi made SR1.52 billion ($405 million) in the three months to December 31 compared with SR1.55 billion in the same period a year earlier, it said in a statement on Thursday.

Seven analysts surveyed by Reuters had expected the bank to post an average net profit of SR1.70 billion for the quarter.

Al Rajhi said its board was recommending a SR0.75 per share cash dividend for the second half of 2014, down from the SR1 per share which the bank paid for the second half of 2013.

Shares in Al Rajhi slid 2.7 per cent in the opening minutes of trading on the results and the dividend cut.

The profit decrease was attributed to lower total operating income, which fell 12.9 per cent to SR3.09 billion, the bank said, without elaborating.

Saudi companies issue brief earnings statements early in the reporting period before publishing more detailed results later.

Al Rajhi had been hard hit by regulations on retail banking fees that were enforced last year, said Naveed Ahmed, senior manager of research at Global Investment House. It had forecast a fourth quarter net profit of SR1.74 billion for Al Rajhi.

The kingdom's central bank published new consumer lending rules in September, giving it the power to cap retail lending at individual banks and limiting fees that banks can charge.

The other Saudi Arabian lenders to report lower than expected earnings were National Commercial Bank, the kingdom's largest bank, and Saudi British Bank.

Other banks have reported strong earnings growth, including estimate-beating profits from Samba Financial Group , Riyad Bank and Banque Saudi Fransi. - Reuters