Saudi banks to see muted Q4 profit growth, says Riyad Capital

Riyad Capital said in a fourth quarter earnings preview for the Saudi banking sector that it expects an average net income growth of 7 percent year-on-year for stocks under its coverage.

The profit growth, however, is muted compared to the average 22 percent YoY rise in net special commission income (NSCI), the brokerage added.

“This is due to weaker other income numbers in general as the market was less conducive to fee based income coupled with higher provisioning

charges.”

The report noted that Banque Saudi Fransi (BSF) is likely make provisions of SAR 228 million in Q4 versus SAR 95 million in the preceding quarter and SAR 181 million last year.

Arab National Bank may book SAR 231 million as compared to SAR 212 million in Q3. “Similarly, expect a rise to SAR 231 million at Saudi British Bank (SABB) in Q4 versus SAR 190 million in the preceding quarter,” it said.

Where advances are concerned, Riyad Capital has forecast an overall 7 percent YoY growth. Alinma Bank is likely to be top with a 29 percent rise, followed by 10 percent YoY increase at BSF and 8 percent increase at Al Rajhi Bank. SABB is expected to lag with a meager 2% growth.

The company also forecast an overall deposits increase by 4 percent YoY.

Meanwhile the brokerage has revised all ‘Buy’ recommendation to ‘Neutral’ for Alawwal Bank, BSF, SABB, Arab National Bank, and Samba Financial Group “given that stock prices have run up substantially in this rally and all stocks trade in the vicinity of our fair values.”

The brokerage firm maintained a ‘Neutral” recommendation on Al Rajhi Bank and Alinma Bank.

“It is heartening to see all names trading above their book value with an average 2016E P/B of 1.2x versus 0.9x at the same time last quarter.” Riyad Capital said.