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By Angus McDowall
RIYADH, Oct 14 (Reuters) - Al Rajhi, Saudi Arabia's largest listed bank, reported a fall in quarterly earnings on Sunday, joining rivals which have failed to translate a surge in bank lending into profits.
The results, which missed analysts' forecasts, echoed those of Riyad Bank, Saudi British Bank (SABB) and Banque Saudi Fransi (BSF), the kingdom's third, fourth and fifth largest lenders.
All four banks cited higher expenses, but did not specify which costs had risen.
The weaker-than-expected performances, which included drops in net profit for both Al Rajhi and BSF, came in what economists had described as a comfortable climate for Saudi banks.
Lending to the private sector grew by 14 percent in August over the same month last year, the Saudi Arabian Monetary Authority (central bank), said in September.
A report by Credit Suisse in August predicted Saudi banks should deliver double-digit earnings growth for the next three years thanks to higher credit volumes.
Al Rajhi said on Sunday third-quarter net profit dipped 3.5 percent from last year to 1.87 billion riyals ($498 million).
Ten analysts polled by Reuters had forecast profit of 2.11 billion riyals on average.
"It has come as a surprise with numbers being well short of expectations, said Murad Ansari, a banking analyst for EFG Hermes in Riyadh.
He said one reason for the banks' poor results could be that they are starting to increase provisions against bad loans again.
"The difference is generally explained by provisioning costs," Ansari said.
Last year, Saudi lenders finished a period of provisioning following the 2009 collapse of a major local conglomerate, Ahmad Hamad Algosaibi and Brothers.
Higher money market funding costs may also have dented profits, with the Saudi Arabian inter-bank offered rate (SAIBOR) hitting its highest level since 1999 this summer.
Another factor could be higher staffing costs as the kingdom tweaks its labour laws to encourage firms to employ Saudi nationals instead of relatively cheaper expatriates.
An August Purchasing Managers Index survey made by SABB showed private sector input costs, such as wages, climbed to 56.64 points from 55.75 points in July, while output price growth fell sharply to 48.48 points from 51.59 points in the same period.
Ten analysts polled by Reuters had forecast a profit for Al Rajhi of 2.11 billion riyals on average.
The bank's total operating profit for the quarter rose 14 percent to 3.64 billion riyals, while total funding jumped 23 percent year on year to 166 billion riyals, it said in a bourse statement.
Some banks bucked the trend.
The kingdom's second-largest lender by market value, Samba Financial Group said on Saturday net profit rose 2.3 percent to 1.16 billion riyals, comfortably more than the 1.13 billion riyals analysts had forecast.
Saudi Hollandi Bank and Arab National Bank (ANB) also posted higher-than-expected earnings in what ANB chief executive Robert Eid told Reuters was an environment in which "businesses are doing well - balance sheets are robust".
None of the other bank senior executives were available to comment on their performance.
Banking stocks lost 1.9 percent on Saturday as the market responded to last week's results, but were flat on Sunday after Samba's earnings announcement.
Al Rajhi shares have lost 8 percent in the past month which analysts have attributed to uncertainty over the distribution of stock owned by one of its owners who recently died.
Reporting by Angus McDowall; Editing by Erica Billingham