Bank Aljazira’s Q3 net profit in-line with estimates, says Albilad Cap

Bank Aljazira’s net profit of SAR 228 million in the third quarter of 2017 came in-line with Albilad Capital’s expectation of SAR 224 million.

“We believe that the bank focused on raising the lending profitability by taking advantage of higher interest rates, instead of raising loan volumes. We believe this headwind will continue in the near term, which will lead to pressure on deposits and loans growth,” the brokerage said in an earnings review.

Net special commission income surged by 15.5 percent year-on year (YoY) and 3.7 percent quarter-on-quarter (QoQ), benefiting from higher interest rates.

Non-interest income also grew 27.9 percent YoY supported by fees & commission income, net trading income, and exchange income.

Operating expenses increased 10 percent YoY and 4 percent QoQ, mainly due to a rise in impairment charges for credit losses, general and administrative expenses, and depreciation and amortization expenses.

Customer deposits in Q3 dropped 1.3 percent YoY. The bank incurred a sharp decrease in special commissions’ expense, implying it may have reduced high-cost deposits added during the previous-year, the brokerage said.  

Loans fell 5.3 percent YoY, so the loans-to-deposits ratio declined 3.3 percent YoY hitting 79.2 percent in Q3 2017.

Albilad Capital has maintained a “neutral” rating on the stock with a target price of SAR 12.45 per share.