Itqan Cap says Bank Albilad results positive despite higher provisions, maintains 'Neutral' rating

Bank Albilad reported a positive set of results despite higher provisions, Itqan Capital said in a recent report, attributing the increase in net income to continued strong financing growth and an impressive reduction in cost of funds.

The bank’s financial indicators and asset quality remain sound as capital adequacy ratio (CAR) kept stable at 17.8% and non-performing loans (NPLs) ratio fell to 1.2% in Q3 2020 compared to 1.4% in Q3 2019.

The bank is well-provisioned with NPL coverage of 260% in Q3 2020 against 240% in Q2 2020, reflecting its ability to absorb future potential losses, the report added.

Itqan expects Albilad to benefit from real estate exemption from 15% value-added tax (VAT) as its mortgage portfolio accounts for 55% of retail portfolio, supporting continued mortgage growth, yet lending rates will remain under pressure.

The research firm remains cautious on Bank Albilad despite positive results in the third quarter as economic uncertainties rise amid fears of second wave of COVID-19, and markets volatility peak. On a fundamental basis, this suggests a rise in provisions and slower credit growth.

Itqan Capital maintained “Neutral” recommendation for Bank Albilad with a target price (TP) of SAR 22.9/share.