(Adds Alawwal Q1 earnings, analyst quote)
DUBAI, April 17 (Reuters) - Al Rajhi Bank, Saudi Arabia's second-largest lender by assets, reported a 10.1 percent rise in its first-quarter net profit on Monday, beating analysts forecasts.
Smaller lender Alawwal Bank, partly owned by Royal Bank of Scotland, posted a 36.7 percent drop in quarterly profit as the lender was hit by higher impairment charge for credit losses.
The level of provisioning on bad debt was the main difference between the results of the two lenders, said Murad Ansari, a Riyadh-based analyst at EFG Hermes.
Al Rajhi also benefited from a larger retail book compared to Alawwal, which is more exposed to the corporate sector where there is more pain, he said.
Saudi banks are facing headwinds as cheap oil cuts state revenues and forces the government into expenditure cuts, weighing on consumer spending and business activity, while pushing up bad loans.
Al Rajhi made 2.22 billion riyals ($589 million) in the three months to March 31, up from 2.017 billion riyals in the same period a year earlier, it said in a bourse statement.
Four analysts surveyed by Reuters had on average forecast the bank's quarterly profit would be 2.156 billion riyals.
Al Rajhi, which had reported rising profit growth in the previous five quarters, attributed the performance in the first quarter to higher net financing and investment income even though fee income fell.
Saudi companies issue brief earnings statements early in the reporting period before publishing more detailed results later.
Alawwal, previously called Saudi Hollandi Bank, made a profit of 324.0 million riyals in the three months to March 31, down from 511.5 million riyals in the corresponding quarter of 2016, below some market forecasts.
NCB Capital had projected a net profit of 376 million riyals, while EFG Hermes' profit forecast for the bank was 443 million riyals.
Alawwal, which launched a new corporate identity in November, could undergo a change in shareholder after RBS hired Credit Suisse to sell its 40 percent stake in the lender, sources told Reuters in November. ($1 = 3.7502 riyals) (Reporting by Saeed Azhar and Tom Arnold; Editing by Toby Chopra)