Falcom maintains ‘neutral’ recommendation on Bank Albilad; lowers TP to SAR 26

Falcom Financial Services maintained its “neutral” recommendation on Bank Albilad and lowered the target price of the stock to SAR 26 per share.

The brokerage said in the Q3 earnings review that the bank’s loan portfolio increased by 13.5% year-on-year (YoY) to SAR 54.4 billion during Q3 2019, supported by the drop in interest rate that boosted the overall credit demand in the country.

The brokerage noted that the bank’s operating expenses continued to rise and remain a concern.

Operating expenses rose 17.1% YoY to SAR 521.2 million in Q3 2019 due to an increase in depreciation, staff expenses, other general and administrative, the report maintained.

In addition, the rise in funding costs is expected to negatively impact the company’s net interest margin expansion, the report added.

It is worth noting that Saudi Arabian Monetary Authority (SAMA) cut repo rates by 25 basis points (bps) to 250 bps for the second time during this year, in line with US Federal Reserve’s rate cut announcement in September 2019.