Bank AlJazira posts lower quarterly profit on one-off revenue in Q1 2022: CEO

Naif Al Abdulkareem CEO of Bank AlJazira

Bank AlJazira’s lower profit in Q1 2023 was attributed to the one-off revenue recognized in the first quarter of 2022. The bank offset this impact, as it reported 53% growth in income from finance and investments with steady operating expenses and lower cost of risk, CEO Naif Al Abdulkareem told Argaam in an exclusive statement.

Total assets rose 15% year-on-year (YoY) to SAR 119 billion in Q1 2023, backed by the bank’s lending and investment portfolios that grew by 14% and 13% YoY, respectively.

The lending portfolio growth in the first quarter on a YoY basis is primarily due to the corporate and private banking finance, which contributed to improve variable-rate loans, Al Abdulkareem said.

The retail loan portfolio inched up 2.9% YoY. The bank will continue boosting variable-rate assets to improve total interest.

The CEO indicated that Bank AlJazira maintained its strategy to grow variable-rate assets in the first quarter, along with supporting financing sources, cost efficiency initiatives and cost of risk reduction. The bank will push ahead with building on its variable-rate lending portfolio to back growth goals and offset the impact of financing costs amid changing interest rates.

The bank reported a significant increase of 53% YoY in income from financing and investments to reach SAR 1.33 billion in Q1 2023, driven by the portfolio growth and rate repricing. The remarkable rise in interest rates led to a 451% YoY rise in the interest on deposits and financial liabilities. Non-interest income jumped 26% YoY, excluding the one-off gains recorded in Q1 2022.

On the other hand, operating expenses remained unchanged despite continued investment in human resources, digital transformation and technology. Further, a lower cost of risk in the first quarter implied a better credit asset quality. The bank also maintains one of the highest NPLs coverage ratios at 213%.

Al Abdulkareem indicated that the bank’s investment portfolio increased by 13% YoY to SAR 36 billion in the first quarter of the year. The portfolio comprises highly-liquid securities, especially government and and quasi government securities. Bank AlJazira continues its role as a primary dealer in the government's debt instruments through the National Debt Management Center (NDMC). The bank’s investment portfolio is mainly composed of fixed-rate securities.

Further, customer deposits continued their growth by 9.6% YoY to SAR 86.9 billion, despite fierce market competition on the commercial deposits level. The bank had successfully managed non-interest deposits, which accounted for 45.5% of total deposits. Bank AlJazira will continue to focus on growing its non-interest deposit portfolio to have a larger contribution and help reduce the cost of finance.

The CEO affirmed the solid and resilient financial position of Bank AlJazira. Total shareholders’ equity reached SAR 13.97 billion as of March 31, 2023. It also had a strong Tier I and Tier II capital adequacy ratio (CAR) of 19.35%. Shareholders’ reserves also increased, thanks to the positive change in the interest curve.