Alawwal Bank Q1 misses estimates on higher Opex: Riyad Cap

Alawwal Bank’s net profit of SAR 219 million for the first quarter of 2019 missed Riyad Capital’s SAR 320 million forecast, the research firm said in an earnings review.

“The cause of the deviation was the higher than expected operating expenses that surged on an annual and quarterly basis,” the report said.

Loans dropped by SAR 2 billion quarter-on-quarter (QoQ) to SAR 55.8 billion, in-line with expectations, while deposits fell by SAR 2.7 billion QoQ to SAR 61.8 billion, mainly from time deposits on high interest rates.

Loans-to-deposits ratio rose by 74 basis points to 90 percent.

Investments also declined in Q1 for the fifth consecutive quarter by SAR 445 million to SAR 15.6 billion, despite the increase in bank’s holdings of government bonds during the quarter.

“The bank’s balance sheets reduction comes in light of its forthcoming merger with SABB,” the firm said.

Net special commission income was flat when compared to a year earlier, but fell 7 percent QoQ to SAR 670 million, lower than the estimates of SAR 739 million.

Total operating income increased 5 percent YoY but dropped 4 percent QoQ to SAR 900 million, in-line with forecast of SAR 941 million forecast. Operating expenses rose 18 percent YoY and 8 percent QoQ to SAR 680 million, beating the projections of SAR 618 million.

Provisions for credit losses reached SAR 338 million, compared to an estimate of SAR 305 million.

Riyad Capital didn’t recommend a rating or target price on the stock, pending the merger with SABB.