Two of Saudi Arabia's largest private lenders joined rivals in announcing lower first-quarter earnings due mainly to lower lending income, highlighting continued caution after a problematic 2009.

The declines in both Samba Financial Group and Banque Saudi Fransi first-quarter net profit came in line with analysts forecasts.

Profits at most Saudi banks came under pressure in 2009 from provisions to counter exposure to some troubled Saudi firms and also from flat credit growth as lenders restricted loans during the global slowdown.

Samba and Fransi's earnings were further evidence that the credit market in the kingdom has yet to stabilise after credit offered by Saudi banks closed 2009 with a first annual drop since at least 2001.

Riyad Bank, SABB bank and Saudi Hollandi Bank have all reported lower lending income during the first quarter of 2010.

'Saudi banks have little choice but to wait for confidence to improve. Concern about the solvency of clients is still there but you also have less demand for loans,' said Hesham Abu-Jamea, head of research at Bakheet Investment Group.

'Still, the main driver of this decline in loans are banks themselves which have stepped up scrutiny over loan applications and put a lot of new conditions to obtaining them'.

Samba, Saudi Arabia's second-biggest lender by market value, made a net profit of SR1.21 billion ($322.7 million) in the three months to end-March, down 4.8 per cent from SR1.27 billion a year earlier, it said in a statement.

Analysts were expecting Samba to make an average 1.08 billion riyals in net profit during the period.

Samba said its net lending income fell during the first quarter by 10.5 percent to SR1.17 billion while income from non-lending operations - which includes brokerage and foreign exchange transactions - slid 1.5 per cent.

Earnings per share slid to 1.35 riyals from SR1.41 in March, 2009. The loans portfolio fell to SR85 billion down from SR90 billion by the end of March, 2009, while deposits rose 10.5 per cent over the same period.

The lender managed however to reduce its operating costs by 12 percent during the quarter -- among the biggest savings achieved by eight listed banks to have so far announced their earnings.

Meanwhile, Fransi, in which France's Calyon holds a 31.1-per cent stake, made SR714 million in net profit during the period, down from SR741 million a year earlier.

Fransi's operating income inched down 0.6 percent to 1.07 billion riyals after lending income slid 5.7 percent to 723 million riyals. Fransi's earnings per share fell to 0.99 riyal in the first quarter from 1.02 riyal a year earlier.

Its loans portfolio fell 1.2 per cent to 80 billion riyals while deposits fell 4.3 per cent to 88 billion riyals.-Reuters