SABB’s Q2 net profit beats estimates on negative provisions, says Riyad Capital

Saudi British Bank (SABB) in Q2 2018 reported a 27 percent year-on-year (YoY) growth in net profit to SAR 1.43 billion, beating both Riyad Capital’s SAR 1.11 billion estimate and the market consensus of SAR 1.12 billion, the research firm said in an earnings report.

“The deviation resulted primarily from lower than expected operating expenses, falling by 39 percent quarter-on-quarter (QoQ) due to booking negative provisions of SAR (91) million,” the report said.

Net loans decreased by SAR 3.1 billion QoQ to SAR 113 billion, close to the SAR 116 billion forecast.

Deposits depleted as well by SAR 2.5 billion QoQ to SAR 133 billion, (mostly from time deposits) in-line with the estimates of SAR 135 billion.

The loan-to-deposit rate slid to 82 percent from 83 percent in Q1.

Meanwhile, net investments rose by SAR 500 million to SAR 32 billion, in-line with the sector trend.

Net special commission income (NSCI) was reported at SAR 1.39 billion, almost matching the SAR 1.36 billion estimate. Special income expense rose 8 percent YoY and 9 percent QoQ.

Non-core income has risen 8 percent QoQ to SAR 489 million.

Operating expenses fell substantially by 34 percent YoY and 39 percent QoQ to SAR 454 million, as provisions for credit losses dove, registering negative numbers of SAR (91) million.

Riyad Capital recommended a “Neutral” rating on the stock and raised the target price to SAR 36 per share from SAR 30 a share.