AlJazira Capital issues ‘Neutral’ rating on Al Rajhi, Albilad, ‘Overweight’ on Alinma

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The Saudi banking sector achieved strong performance in Q4 2020 as the economy started to recover from the pandemic and credit growth continued at a double-digit rate, driven by the government’s expansionary policy and surging retail demand, AlJazira Capital said in a report.

The firm added that oil prices have recovered strongly and are at pre-COVID-19 levels, which should provide support to the government’s finances, it added.

Meanwhile, the Saudi Central Bank’s (SAMA) SAR 50 billion liquidity support program and private sector financial support program continues to drive credit growth in the near term.

Al Rajhi was the top performer during the quarter. The bank’s net profit increased 34.7% year-on-year (YoY) to SAR 3.121 billion in Q4 2020, driven by an 8.9% YoY rise in net financing and investment income.

“Stellar growth in loans driven by retail sector led to strong earnings growth in Q4 2020; double-digit earnings growth expected in 2021,” AlJazira Capital said.

For Alinma Bank, the investment firm said that higher impairment charges affected net profit in Q4 2020, and higher percentage of corporate loans could increase provisions in 2021.

On Bank Albilad, AlJazira Capital said that double-digit earnings posted despite increase in provision and withdrawal of loan deferral program expected to hike provisions in 2021.

The table below indicates AlJazira Capital’s recommendations and target price on the three banks’ shares: