* Bad loan provisions, lower lending income weigh on Q3
* Samba net down 8.8 percent to $294.1 million
* Riyad net down 19.5 percent to $162.9 million
* Fransi net down 13 percent to $165.6 million
* NCB net down 19 percent to $221.3 million (Recasts with Samba, Riyad, Fransi earnings)
By Souhail Karam
RIYADH, Oct 13 (Reuters) - Four of Saudi Arabia's biggest banks on Wednesday posted bigger-than-expected drops in third-quarter earnings due mainly to lower lending incomes and provisions for non-performing loans.
The majority of Saudi banks have had to book higher provisions for the previous four quarters to cover defaults by some family owned firms.
On Tuesday, five listed Saudi banks reported lower-third quarter earnings which they blamed mainly on higher provisions.
In the most explicit explanation of these profit declines, largest-listed Al-Rajhi Bank said on Wednesday it has nearly doubled provisions during the third quarter to cover 122 percent of its total non-performing loans after it posted an 8.6 percent fall in third-quarter earnings.
Saudi central bank Governor Muhammad al-Jasser said on Tuesday banks should be even more conservative and make provisions cover more than 100 percent of their non-performing loans.
Last year alone, provisions for non-performing loans doubled compared to 2008 to almost 11 billion riyals ($2.93 billion).
Samba Financial Group, the kingdom's second- biggest lender by market value, posted an 8.8 percent fall in third-quarter net profit to 1.1 billion riyals ($294.1 million), which was below an average forecast from analysts of 1.2 billion riyals.
Samba blamed a 14.4 percent fall in its lending income to 1.11 billion riyals during the third-quarter, while it was down by 7.8 percent in the second quarter.
It did not say where it stood on provisions for non-performing loans.
RIYAD, FRANSI, NCB
Riyad Bank reported a 19.5 percent drop in third-quarter net profit to 611 million riyals, well below an average forecast of 756.1 million riyals. It blamed the adoption of a "conservative policy" for the profit fall, local jargon by Saudi banks for higher provisions.
Riyad booked 390.2 million riyals in impairment charges for non-performing loans during the first half of 2010.
However it raised net lending income for the third quarter by 3.2 percent to 1.06 billion riyals after it was down by about 10 percent during the second quarter and the first half 2010.
Banque Saudi Fransi, 31-percent owned by France's Credit Agricole, said a 13 percent drop in its third- quarter net profit followed a rise in operating costs.
In Saudi financial accounting, operating costs for banks include provisions for bad loans as well as salaries.
Fransi did not clarify what caused the rise in operating costs, which according to Reuters calculations, increased by 35 percent to 463 million riyals.
Fransi, Samba and Riyad announced their results after the market closed.
The Saudi banks and financial services index ended almost 1 percent down, underperforming the market's main benchmark.
Earlier on Wednesday, unlisted National Commercial Bank (NCB), the biggest Saudi bank by assets, reported a 19 percent drop in third-quarter net profit, but did not explain the fall.
It however said that net lending income rose 2.9 percent in the nine months to end-September, below the 3.8 percent it had reported for January-June.
Saudi Hollandi Bank reported a 43 percent drop in third-quarter net profit to 85.3 million riyals after it increased unspecified provisions. A consortium led by Royal Bank of Scotland holds a 40 percent stake in Hollandi.
Alinma Bank, the newest to enter the Saudi market, also reported a 49 percent fall in net profit for the third quarter to 20 million riyals, a drop it attributed to start-up costs. ($1=3.750 Saudi Arabian Riyal) (Reporting by Souhail Karam; Editing by Reed Stevenson and Erica Billingham)