Saudi banks aggregate Q1 net profit to slip 3%, says Riyad Cap

Riyad Capital said in a Q1 2017 earnings forecast for the seven Saudi-listed banks under its coverage that it expects them to see a decline in aggregate net profit by 3 percent year-on-year (YoY) to SAR 6.9 billion.

However, the net special commission income (NSCI) is expected to rise by an average of 10 percent YoY.

“The first two months of 2017 provided mixed signals. Since the beginning of the year and up to February, 3-month SAIBOR has declined by 25 bps, indicating a continuous improvement in liquidity. However, deposits have witnessed a massive decline, suggesting the opposite,” the report said.

Non-interest income, in particular fee-based and exchange income, is expected to decline in Q1 and provisions are likely to continue their rise but at a slower pace than 2016.

While Alawwal Bank is expected to record provisions of SAR 95 million in Q1 2017, which comes is in line with SAR 101 million in Q1 last year, while provisions reached SAR 1 billion in the second half of 2016.

Banque Saudi Fransi (BSF) is expected to have slightly higher provisions of SAR 51 million in Q1 versus SAR 42 million last year and SAR 636 million in the previous quarter.

The overall deposits are expected to grow by 2 percent YoY for the sector, led by Alinma Bank with a 20 percent YoY rise, followed by BSFR with a 10 percent YoY increase to SAR 156 billion. 

On the other hand, Saudi Arabian British Bank (SABB) is likely to see a decline in total deposits to SAR 138 billion in Q1 compared to SAR 152 billion last year.

Net advances are expected to grow marginally by an average of 1 percent YoY for the seven banks.

Alinma Bank will likely lead the loan growth with an 18 percent YoY rise, followed by Al Rajhi Bank at 6 percent YoY.

Meanwhile, other banks are expected to contract their loan portfolio led by SABB with a 12 percent YoY decline.

Riyad Capital maintained the target prices and recommendations for all banks at “Neutral”. Except for BSF and ANB which trade below book values and offer decent dividend yields, prompting the brokerage to continue a “Buy” stance.