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* Q3 net profit 1.96 bln riyals vs 1.99 bln riyals yr-ago
* Dragged down by 18.7 pct rise in operating expenses
* Deposits continue decline, down 15.3 pct y/y
* Major lender to construction industry
* Profits down at four big banks reporting Q3 so far (Adds detail, context)
By Tom Arnold and David French
DUBAI, Oct 16 (Reuters) - National Commercial Bank missed analysts' forecasts on Sunday by reporting a 1.6 percent fall in third-quarter net profit, as Saudi Arabia's largest listed lender provided more evidence that a weaker economy is hurting the banking sector.
Banks in the kingdom are feeling the pinch as depressed oil prices slow economic growth to its lowest level in more than three years, forcing belt-tightening by the government, companies and consumers.
The tricky conditions have been reflected in bank earnings so far this quarter. All four of the major Saudi lenders to report third-quarter results so far have posted declining profits.
NCB blamed its third-quarter performance on an 18.7 percent rise in operating expenses, caused by higher impairment charges on financing and investments. It did not elaborate.
The construction sector in particular has been a cause for concern, as contractors are squeezed by state spending cuts and months-long delays in payments owed by the government; NCB is the largest lender to embattled builder Saudi Oger, for example.
The bank made a net profit of 1.96 billion riyals ($523 million) in the three months to Sept. 30, down from 1.99 billion riyals in the same period of 2015, it said in a bourse filing.
Three analysts had forecast on average that NCB would make a quarterly profit of 2.31 billion riyals.
Deposits at the bank sank 15.3 percent year-on-year to 311.2 billion riyals at the end of September. For years, Saudi banks were able to build up hefty deposits as state revenues from high oil prices were parked with them. But lower oil prices have reversed that trend as the government uses cash previously placed with banks to help plug its budget deficit.
NCB's loans and advances at the end of September stood at 259.9 billion riyals, up 8.9 percent on a year earlier.
Quarterly operating income rose 9.5 percent to 4.7 billion riyals because of an increase in special commission income and higher income from investments. This was partly offset by lower trading income and lower dividend income. (Editing by Andrew Torchia)