Bank Aljazira’s Q1 beats estimates on higher operating income: Albilad Cap

Bank Aljazira’s net profit of SAR 245.3 million for the first quarter of 2018 has beaten the estimates of Albilad Capital and the consensus of SAR 203 million and SAR 206.5 million, respectively, the brokerage firm said in an earnings report.

“The primary factor behind the increase was growth in operating income by 9.59 percent year-on-year (YoY) as a result of an increase in net special commission income, net exchange income and net trading income combined with a decrease in net banking fee,” the report said.

Meanwhile, operating expenses increased 7 percent YoY, due to increases in other general and administrative expenses, salaries and employee-related expenses, other operating expenses and depreciation and amortization expenses.

The lender’s loan portfolio declined 5.7 percent YoY in Q1 to SAR 76.17 billion.

Total assets rose 4.4 percent YoY, reaching SAR 92.62 billion, while customer deposits edged up by 1.52 percent YoY to  SAR 50.56 billion.

The bank’s loans-to-deposits ratio decreased to 22.75 percent for the quarter from 82.6 percent a year earlier, driven by deposit growth and lower loans.

Bank Aljazira in March raised its capital from SAR 5.2 billion to SAR 8.2 billion, through the rights issue of 0.5296 share for each share held.

“We believe that the bank focused on increasing the lending profitability by taking advantage of higher interest rates and repo reserve agreement rates like other Islamic banks,” the report said.

After the capital hike, Bank Aljazira is expected to widen its investment portfolio through local bonds.

Albilad Capital recommended a “Neutral” rating on the stock with a target price of SAR 12.78 per share.