Itqan Cap says Al Rajhi Bank’s performance negatively hit by COVID-19

The majority of Al Rajhi Bank's total finance portfolio comes from individuals, which is less risky in the current circumstances than corporate finance, Itqan Capital said in a research note.

“The COVID-19 situation has negatively affected the performance of Al Rajhi Bank through increasing allocations,” the brokerage firm said in the note.

However, the firm still believes that FY2020 will be a challenging year for the whole Saudi banking sector, especially Q2 2020, amid the reduction in repo & reverse repo rates by Saudi Arabian Monetary Authority (SAMA), combined with the high probability of private sector delinquency.

Itqan suggested a rise in provisions, which will reduce Al Rajhi’s profitability.

The firm adjusted Al Rajhi Bank’s target price to SAR 51.1, which represented a downside potential of 5.4%, and maintained “Neutral” recommendation.

Al Rajhi Bank reported a net profit after Zakat and tax of SAR 2.38 billion for Q1 2020, a 7% year-on-year (YoY) decrease, Argaam reported.