Alinma Bank Q4 profit in-line with estimates, says NCBC

Alinma Bank’s net profit of SAR 661 million for the fourth quarter of 2018 came in-line with NCB Capital and market consensus’ estimates of SAR 690 million and SAR 660 million, respectively, the research firm said in an earnings report.

The results are attributed to lower provisions and an 8.5 percent increase in annual earnings asset earnings, which offset the impact of lower NIMs.

“We believe the contraction in NIMs was attributed to a steep rise in funding cost (upc60bps YoY) that offset the increase in asset yields of c12bps YoY. Higher funding cost is attributed to the bank’s tight liquidity position with L/D ratio rising to 92.9 percent vs 88.8 percent in Q4 17,” it said.

Revenues reached SAR1.3 billion, flat YoY and in-line with our estimates. Net Special commission income (NSCI) grew marginally to SAR 972 million (+0.5 percent YoY).

Gross special commission income rose 12 percent YoY to SAR1.305 billion, 5 percent lower than the estimate of SAR1.375 billion, due to lower than expected growth in asset yields.

Operating expenses, including provisions, declined 14.5 percent YoY to SAR 632 million, in-line with forecast.

Loans grew 5.8 percent YoY to SAR 84 billion (+0.9 percent QoQ) while deposits rose 1.2 percent YoY to SAR 90 billion (+0.3 percent QoQ) in line with the estimates.

Loan-to-Deposit ratio stood at 92.9 percent in Q4 2018 versus 88.8 percent a year earlier.

Investments jumped 22.1 percent YoY to SAR 18 billion (+4.3 percent QoQ), while total assets grew 5.7 percent to SAR121 billion (+1.1 percent QoQ).

NCB Capital recommended a “Neutral” rating on the stick with a target price of SAR 23.8 per share.

“We believe the strong growth momentum is already priced in at the current levels. Alinma trades at a 2019f PB of 1.6x, in line with peer average,” it added.