Samba’s Q2 net profit in-line with estimates, says Riyad Cap

Samba Financial Group’s net profit of SAR 1.27 billion for the second quarter this year came in line with Riyad Capital’s estimates of SAR 1.29 billion, but it missed the market consensus expectations, the brokerage said in an earnings review.

Net special commission income (NSCI) increased in Q2 by 4 percent year-on-year (YoY) and 2 percent quarter-on-quarter (QoQ) to SAR 1.39 billion, due to lower special commission expense. Interest rates have been more or less stable in Q2.

The loan-to-deposit ratio (LTD) fell to 70.4 percent in Q2 compared to 72.6 percent in the previous quarter, as deposits increased by SAR 860 million while net advances came down by SAR 3.7 billion.

“Rise in deposits to over SAR 171 billion (with a simultaneous fall in their cost) is a positive sign after two quarters of decline but just fell short of our SAR 172 billion estimate,” the report said.

The non-core income stood at SAR 602 million, in line with the estimates of SAR 601 million. It declined from a year earlier as well as the previous quarter. However, it improved compared to the quarterly average of SAR 540 million in H2 2016.

“Management commentary points to a rise in forex and trading income and gains on non-trading investments,” the review said.

Operating expenses dropped in Q2 by 4 percent QoQ to SAR 717 million, as provisions are expected to have been lower despite higher general and admin expenses.

The brokerage said it believes provisions were under SAR 80 million in Q2 compared to SAR 107 million in 1Q.

Riyad Capital has maintained its “Neutral” rating on the stock and raised the target price to SAR 29 per share from SAR 25 per share.