Alinma Bank’s Q3 profit beats estimates

Alinma Bank’s Q3 2017 net profit of SAR 542 million topped Bloomberg consensus by 12 percent, backed by a 28 percent year-on-year (YoY) and a 6 percent quarterly rise in revenue, Shuaa Capital said in an earnings review.

Revenues were driven by better spreads. Margins rose up 7 basis points (bps) sequentially (+40 bps YoY) in the same period, backed by lower funding cost.

Non-interest income was equally supported by fees, investment and exchange income.

The bank’s cost of risk was stable at 65 basis points (bps) in 3Q, but up 35 bps on a YoY basis.

Retail loans are projected to pick up in the coming years, given the less aggressive backdrop of government/construction projects.

The bank is likely to grow faster than the sector, with a decline in landing relative to their historical growth patterns.

“Risk costs for the bank will continue to surge (65 bps in H1 2017 and 30 bps in 2016 versus 63 bps in H1 2017 and 70 bps in 2016 for the sector) given the bank’s chunkiest exposure to building/construction and government entities at 22 percent and 9 percent of lending respectively (versus 9 percent and 1 percent at the sector level),” the investment bank added.

Some positive stock momentum is projected following these results; however this trend is unlikely to sustain.