Al Rajhi Bank’s Q2 2020 performance strong, says Itqan Capital

Al Rajhi Bank reported strong performance in the second quarter of 2020 despite low SAIBOR rates and challenging economic conditions, thanks to its fixed-rate retail-focused portfolio and strong growth in mortgages, Itqan Capital said in a new report.

However, higher year-on-year (YoY) provisions coupled with lower net interest margin (NIM) pressured the net income during the second quarter.

Al Rajhi’s high asset quality and substantial capital and liquidity buffers will help weather the impact of current challenging market conditions, the report noted.

The brokerage firm expects that dividends are likely to be significantly cut or even canceled for FY2020 for the banking sector since banks attempt to preserve their capital in a challenging environment.

While Al Rajhi Bank is well-positioned to face current economic challenges, Itqan Capital believes that the positives are already priced at the current market price.

The brokerage firm maintained its “neutral” recommendation on the stock, revising the target price higher to SAR 61.4 from SAR 51.10 a share.

The “neutral” rating represents the stock will stay in the range of its value (up/down 10%) in a 52-week period.