ANB Q3 profit hit by provisions for credit losses: Riyad Cap

Arab National Bank’s (ANB) third quarter net profit of SAR 722 million fell below estimates set by Riyad Capital at SAR 774 million, the firm said in an earning review.

The brokerage firm attributed the decline primarily to a hike in provisions for credit losses, which it estimated at over SAR 200 million for the quarter. The rise in provisions might be an early indicator of a further rise in provisions to come over the next few quarters, not just for ANB but also for other banks, it said.

Deposits fell from SAR 135.7 billion at December-end to SAR 128.2 billion at September-end which “reflects the tight liquidity in the market where some banks are facing more difficulty than others.”

“The net effect of falling loans and deposits has been a 100bps decline in the LDR from 90 percent to 89 percent makes us think that the bank will make efforts to bring this ratio down further going forward,” the report added.

Riyad Capital has issued a “buy” recommendation on ANB with a target price of SAR 22 per share.

“Our full-year 2016 forecast accounts for SAR 845 million in provisions versus SAR 322 million accrued until H1-2016,” the report added.