Saudi banks | Not all bleak; Picks: RJHI, SABB, BJAZ, NCB
Negative sentiment, but positive signals overlooked. A number of negative developments erupted over the past year, triggering selling pressure, leaving most of our Saudi banks coverage close to one-year lows. These include: i) the IMF cutting 2019e GDP growth to 0.2% from 1.9%, ii) Fitch downgrading Saudi’s credit rating by one notch, iii) the strike on Aramco’s facilities in Sep-19, and iv) oil prices stabilising at relatively lower levels (
Incorporate more cautious short-term outlook, roll over valuations. We look for: i) the mortgage segment to continue driving loan growth until corporate lending recovers in 2H20, ii) NIMs to ease in 2020-21e, on lower asset yields, a reflection of a lower interest rate environment, iii) system liquidity to improve on better access to wholesale funding, and iv) a stable asset quality outlook, with some downside risk, if the economic slowdown persists. As such, we: i) lower our NIM assumptions to reflect a 13bps drop over 2020-21e, and ii) adjust our loan assumptions to reflect slightly lower-than-expected loan growth rates for 2020-21 (+8.1% on average vs. previously estimated 8.6%).
Pick Al Rajhi on best fundamentals, SABB on growth potential, AlJazira on valuation; Play NCB-Riyad potential merger on former. We favour: i) Al Rajhi: the strongest capacity against NIM pressure, solid franchise and fundamentals (profitability, efficiency, and capitalisation); ii) SABB: attractive valuation, gained scale following the integration of newly-acquired book, normalised provisioning going forward, iii) AlJazira: good entry point (2020e P/BV 0.93x), strong growth outlook following balance sheet clean-up through 1H18, and highly-comfortable capitalisation, and iv) NCB: value play as the largest corporate lender, second-largest retail lender in Saudi, healthy NIB contribution, robust asset quality and capitalisation metrics, and potentially higher value creation if NCB-Riyad integration concludes.
News flow on Aramco also causing market volatility. News flow suggesting the IPO is approaching triggers selling pressure across Tadawul, as locals cash out ahead of the issuance, while talks suggesting delays tend to give the market a breather. We note that Aramco’s inclusion in MSCI would also possibly trigger further sell-off and estimate outflows of cUSD540mn from the current constituents (in case of a USD1tn valuation, 1% float) to cUSD1.8bn (USD2tn, 2% float). Within our top pick list, SABB and AlJazira are set to see the least outflows in the upcoming MSCI review if Aramco is included.
Al Rajhi Banking & Investment Corporation SJSC. Al Rajhi Banking & Investment Corporation SJSC is a Saudi Arabia-based bank, which is engaged in banking and investment activities. The Bank operates under the following segments: Retail, which includes individual customer deposits, credit facilities, customer debit current accounts (overdrafts), fees from banking services and remittance business; Corporate, which includes deposits of Very Important Person (VIP), corporate customers deposits, credit facilities, and debit current accounts (overdrafts); Treasury, which incorporates treasury services, Murabaha with Saudi Monetary Agency (SAMA) and international Mutajara portfolio, as well as Investment Services and Brokerage, which includes investments of individuals and businesses in mutual funds, local and international share trading services and investment portfolios.
Alinma Bank SJSC, is a Saudi-Arabia-based joint stock company, which is engaged in the provision of banking and investment services through products and instruments that are in accordance with Shariah (Islamic law) principles. The Bank operates under the following business segments: Retail Banking, which includes financing, deposit and other products or services for individuals and small businesses; Corporate Banking, which includes financing, deposit and other products and services for corporate and institutional customers; Treasury, which includes murabahas with banks, investments and treasury services, as well as Investment and Brokerage, which includes investment management, brokerage services and asset management activities related to dealing, managing, arranging, advising and custody of securities.
Aljazira Takaful Taawuni Company SJSC is a Saudi Arabia-based company engaged in the provision of insurance products and services in accordance with Islamic Sharia principles. The Company's activities are divided into two segments: Insurance individual segment offers life insurance products on an individual basis including unit linked investment oriented products, as well as Insurance group life segment offers life protection programs to the members of organizations on a group basis and credit protection benefits in respect of personal loan given by financing organizations.
Arab National Bank. Arab National Bank is a Saudi Arabia-based banking institution. The Bank is operating under the following segments: Retail Banking, which includes deposit, credit and investment products for individuals; Corporate Banking, which includes loans and advances, deposits and other credit products for corporate and institutional customers, small to medium sized businesses and the Bank's London Branch; Treasury, which manages the Bank's trading and investment portfolios and the Bank's funding, liquidity, currency and commission rate risks, as well as Investment and Brokerage Services, which includes investment management services, asset management activities related to dealing, managing, arranging and advising and custody of securities. Its subsidiaries include: Arab National Investment Co, Al Arabi Heavy Equipment Lease Co and Arabian National Bank Insurance Agency.
Bank Albilad is a commercial bank based in the Kingdom of Saudi Arabia. Co. is engaged banking, investment and other financial activities. Co. provides a full range of banking services, financing and investing activities through various Islamic instruments. Co.'s activities are conducted in accordance with Islamic Shariah and within the provisions of the Articles and Memorandum of Association, by-laws and the Banking Control Law. Co. provides these services through 102 banking branches and 151 exchange and remittance centers in the Kingdom of Saudi Arabia.
Banque Saudi Fransi is a commercial banking group based in Saudi Arabia. Co.'s activities include the offering of banking products and services in addition to the offering of Islamic products approved by an independent legal panel. Co. is also engaged in brokerage, asset management, financial advisory activities, insurance brokerage and insurance activites. Co.'s operations are organized along five main business lines: Corporate Banking, Commercial Banking, Retail Banking, Treasury and Investment Banking and Brokerage. Co. maintains its activities through 83 branches in the Kingdom of Saudi Arabia.
National Commercial Bank SJSC. National Commercial Bank SJSC is a Saudi Arabia-based bank. It operates under the following segments: Retail, which provides banking services, including lending and current accounts in addition to products in compliance with Shariah rules, to individuals and private banking customers; Corporate, which provides banking services including conventional credit-related products and financing products in compliance with Shariah rules to small sized businesses, medium and large establishments and companies; Treasury, which provides a range of treasury and correspondent banking products and services, including money market and foreign exchange, to the Group's clients, in addition to carrying out investment and trading activities and managing liquidity risk, market risk and credit risk; Capital Market, which provides wealth management, asset management, investment banking and shares brokerage services, as well as International, which comprises banking services provided outside Saudi Arabia.
Riyad Bank SJSC. Riyad Bank SJSC is a Saudi Arabia-based bank that provides a range of banking and investment services. The Bank also provides Islamic banking products. The Bank mainly operates under the following segments: Retail, which includes deposit, credit and investment products for individuals and small to medium sized businesses; Investments Banking and Brokerage, which includes investment management services and asset management activities related to dealing, managing, arranging, advising and custody of securities; Corporate, which mainly handles corporate customers' current accounts, deposits and provides loans, overdrafts and other credit facilities and derivative products; Treasury and Investments, which mainly provides money market trading and treasury services as well as the management of the Bank's investment portfolios.
Samba Financial Group SJSC is a Saudi Arabia-based banking institution. It provides a range of banking and related services as well as Shariah approved Islamic banking products. It operates under the following business segments: Consumer, which comprises individual customer time deposits, current, call and savings accounts, as well as credit cards, retail investment products, individual and consumer loans; Corporate, which comprises corporate time deposits, current and call accounts, overdrafts, loans and other credit facilities as well the Group's customer derivative portfolios and its corporate advisory business; Treasury, which principally manages money market, foreign exchange, commission rate trading and derivatives for corporate and institutional customers as well as for the Group's own account, and Investment Banking, which is engaged in investment management services and asset management activities related to dealing, managing, arranging, advising and custody businesses.
The Saudi British Bank is engaged in retail and corporate banking services and treasury in the Kingdom of Saudi Arabia. Co. provides retail banking which caters mainly to the banking requirements of personal and private banking customers; corporate banking which caters mainly to the banking requirements of commercial and corporate banking customers; and treasury which manages Co.'s liquidity, currency and special commission rate risks. Co. also provides Shariah approved products, which are approved and supervised by an independent Shariah Board established by Co. Co. operates as a commercial bank through a network of 80 branches in the Kingdom of Saudi Arabia.
The Saudi Investment Bank is a commercial banking group based in Saudi Arabia. Co. is engaged in provision of banking and banking related services. Co. also provides to its customers Islamic (non-interest based - Murabaha, Istisna'a, Ijarah) banking products, which are approved and supervised by an independent Shariah Board established by the Bank. Co.'s operations are organized along four business segments: Retail Banking, Corporate Banking, Treasury and Asset Management and Brokerage. Co. is active through its 48 branches located in the Kingdom of Saudi Arabia.
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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