Aljazira Cap maintains 'neutral' on Al Rajhi Bank, Bank Albilad; 'overweight' on Alinma Bank

Aljazira Capital maintained its “neutral” recommendation on Al Rajhi Bank and Bank Albilad, as well as “overweight” rating on Alinma Bank.

However, the brokerage lowered the target price on all these stocks.

The banking sector’s strong performance continued in the first quarter of 2020, with robust growth in deposit and loan, despite COVID–19 crisis towards the end of the quarter.

Higher provision for impairment negatively impacted the profitability of most banks, the brokerage noted, expecting a decrease in the repo and reverse repo to lower the net interest margins (NIMs).

According to Aljazira Capital, changes in the mortgage law places Al Rajhi in a favorable position due to its retail-heavy portfolio. However, SAMA’s discount rate cut is likely to hit the bank’s top line and bottom line, with earning per share (EPS) estimated at SAR 3.67 in FY 2020.

Alinma Bank’s deposit growth rate is expected to fall slightly in FY 2020 due to changing business conditions.

On the other hand, the brokerage estimated Bank Albilad’s cash dividend distribution at SAR 0.35 per share for FY 2020.