Saudi bank SABB says Q2 net profit falls 1.9 pct on bad debt charges

DUBAI, July 25 (Reuters) - Saudi British Bank (SABB), the kingdom's sixth-largest bank by assets, posted a 1.9 percent drop in its second-quarter net profit on higher provisions for bad debt, broadly in line with analysts' forecasts.

The bank, an affiliate of HSBC Holdings (Frankfurt: 923893 - news) , said it made 1.13 billion Saudi riyals ($301.35 million) in the three months ending June 30, compared with 1.15 billion riyals in the same period a year earlier, according to a bourse filing.

Four analysts surveyed by Reuters had expected the bank to post an average net profit of 1.01 billion riyals for the quarter.

The drop in net profit was primarily driven by higher operating expenses, which rose 10.4 percent mainly due to an increase in provision for credit losses, SABB said.

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

Operating income for the quarter rose by 2.3 percent on the corresponding period of 2016 to 1.8 billion riyals, while profits from special commissions increased 8.6 percent over the same time frame to 1.28 billion riyals.

Lower government spending as a result of reduced oil prices has raised challenges for Saudi banks, leading to lower net interest income and, in some cases, a rise in provisioning for bad loans.

The bank is in merger talks with fellow Saudi Arabian lender Alawwal Bank, with sources telling Reuters on May 31 that SABB had appointed U.S. investment bank Goldman Sachs (NYSE: GS-PB - news) to advise it on the proposed deal.

($1 = 3.7498 riyals) (Reporting by Saeed Azhar and Tom Arnold; Editing by Adrian Croft)