SABB’s Q1 meets estimates on lower OPEX, says Riyad Capital

Saudi British Bank’s (SABB) net profit of SAR 1.04 billion for the first quarter of 2018 came in-line with Riyad Capital and the market consensus estimates of SAR 1.01 billion and SAR 1.02 billion, respectively, the brokerage firm said in a report.

“Profitability was a result of lower operating expenses, particularly provisions. In addition, the bank did well on the net special commission income (NSCI) front due to lower special commission expenses,” the report said.

Deposits dropped by SAR 4.8 billion to SAR 135 billion in Q1 compared to a growth of SAR 5.7 billion in the previous month, due to lower demand deposits.

Net advances, as expected, slid slightly by SAR 512 million to SAR 116 billion, more than offsetting the SAR 320 million increase last quarter.

Loan-deposit ratio (LDR) rose to 83 percent in Q1 from 81 percent in Q4 2017, while net investments increased by SAR 4.8 billion to SAR 32 billion, in-line with the sector trend.

The NSCI rose 6 percent year-on-year (YoY) and 1 percent from the previous quarter to SAR 1.3 billion, matching the forecast on lower special commission expense.

“We believe the YoY decline was the result of dumping SAR 6.7 billion of time deposits since Q1 2017,” the firm said.

Special commission income came in flat, while the non-core income declined 21 percent YoY to SAR 451 million, mainly on lower trading income, fee-based income and all other items.

Total income came in at SAR 1.8 billion in-line with the projections.

Operating expenses were down 6 percent YoY to SAR 745 million due to a drop in impairment of other financial assets as well as provisions for credit losses, despite the increase in general and administrative expenses.

Provisions amounted to SAR 207 million, missing the estimates of SAR 224 million.

Riyad Capital recommended a “Neutral” rating on the stock with a target price of SAR 30 per share.