Al Rajhi Bank’s Q1 profit misses estimates: Albilad Cap

Al Rajhi Bank’s net profit of SAR 2.38 billion in Q1 2018 missed Albilad Capital’s estimates of SAR 2.49 billion by 4.7 percent, the brokerage firm said in a report.

Net profit rose 7.29 percent year-on-year (YoY) driven mainly by higher operating income as a result of an increase in the net financing and investment income by 8.12 percent.

In contrast, total operating expenses increased by 7.8 percent, mainly due to the increase in provisions for financing and general administrative expenses.

On a sequential basis, Q1 drop in net profit is attributed to lower operating income and lower special commission, while operating expenses edged up by 0.8 percent.

Loans portfolio declined by 0.16 percent YoY, reaching SAR 229 billion.

Investments, however, surged by 57.6 percent to record SAR 20.7 billion, which led to an increase in total assets by 3.56 percent to SAR 329.2 billion.

Customer deposits rose 2.66 percent YoY to SAR 283.9 billion. Deposits increased at a faster pace than loans growth, as a result, the loans-to-deposits ratio dropped to 80.66 percent in Q1 from 82.5 percent a year earlier. 

“The expected hikes in interest rates and the availability of liquidity in the market, will improve profit margins going forward; therefore we expect that the bank will continue to post robust results during the year,” the report said.

Albilad Capital recommended a “neutral” rating on the stock with a target price of SAR 77.34 per share.