October 18, 2016 / 6:01 AM / a year ago

MIDEAST STOCKS-Gulf set to be weighed by generally poor Q3 results

DUBAI, Oct 18 (Reuters) - Saudi Arabia’s main stock index is likely to be weighed down on Tuesday by a string of subdued quarterly earnings from large-cap companies while disappointing results from a major lender in Abu Dhabi may sour sentiment towards other financial stocks.

Domestically focused companies are bearing the brunt of an economic slowdown, with Saudi Hollandi Bank, which derives most of its business from corporate loans, posting a 46.7 percent fall in third-quarter net profit on Monday, widely missing analysts’ forecast as it set aside cash to cover an increase in bad loans.

The lender made a profit of 262.8 million riyals ($70.1 million); three analysts polled by Reuters had forecast 506.4 million riyals ($135.06 million).

Telecom operator Zain Saudi reported on Monday that its third-quarter loss widened as costs rose and revenue dropped. The company, which has yet to make a quarterly profit since launching services in 2008, posted a net loss of 267 million riyals, compared with a net loss of 223 million riyals in the prior-year period.

Commodity-linked shares were also weak, with Saudi Arabia Fertilizers Co (SAFCO) missing analysts’ forecast and reporting a 68 percent decline in third-quarter net profit.

SAFCO cited a drop in the selling prices of its products, an increase in costs which include electricity, for the fall in profit to 181.4 million riyals from 566.1 million riyals.

But Al Rajhi Bank, the kingdom’s largest Islamic retail bank, reported a 16.7 percent rise in its third-quarter net profit on Monday, meeting analysts’ forecast. The bank earned 2.01 billion riyals, close to 2.06 billion riyals forecast by analysts.

Al Rajhi, a retail focused lender, is the first major lender in the kingdom to report higher profits for the three months to Sept. 30, building on a run of rising profit growth in the previous four quarters.

But investors, who have been put-off by Saudi Arabia’s military involvement in Yemen since March 2015, may take note of the U.N. special envoy for Yemen announcing a plan for a ceasefire in Yemen starting on Wednesday night that would last for 72 hours. Although previous attempts of a truce have been foiled.

Elsewhere in the Gulf, Abu Dhabi’s Union National Bank , the first to report in the emirate, posted a 15 percent drop in third-quarter net profit, missing analysts’ forecasts as interest income fell. Net profit attributable to equity holders in the third quarter was 406.64 million dirhams($110.72 million) versus 480.59 million dirhams in the prior-year period. ($1 = 3.6726 UAE dirham) ($1 = 3.7495 riyals) (Reporting by Celine Aswad; Editing by Andrew Torchia and Amrutha Gayathri)

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