RJHI AB | Shines again post stock sell-off
Recent sell-off warrants an imminent rating upgrade to OW. RJHI offers by far the highest RoEs relative to top global, Islamic, and local peers. This arguably places it in a league of its own, lending more relevance to own-multiple comparisons than those vs. peers. Pending meaningful improvement starting 2024e, when the windfall from higher interest rates reflects on the bank’s margins, RJHI’s RoE will prove to be resilient, rendering its rich multiples as justifiable.
2022e RoE safe despite margin drop. 2022e guidance, detailing >20% loan growth and 55-65bps in NIM compression, reflects a continuation of RJHI’s expansionary strategy, effectively prioritising growth over margins. Nonetheless, its RoE remains safeguarded, supported by high balance sheet and fee income growth, along with decent opex control and lower CoR. We factor in c23% for loan growth, c55bps in NIM compression, and c45bps for CoR, altogether yielding c24% in RoE for 2022e.
Eye ameliorated NIM, RoE outlook post 2022-23e. The repricing of RJHI’s retail non-mortgage portfolio (c42% of the overall loan book), along with new loan originations within the segment are expected to support asset yields more meaningfully beginning 2023e, providing support to NIMs and RoEs. We factor in c40bps NIM improvement in 2023-26e and expect RoE to average c26% over the same period.
Mortgage story: Peaked? Yes; Dead? No. Under the current annual run-rate for new mortgage originations of cSAR140bn, we expect the Vision 2030-inspired national home ownership target of 70% (vs. c65% currently) to be achieved by end-2024e. RJHI’s fair share in these originations secures high single to low double-digit loan growth rates p.a. from mortgages alone, over the coming three years, explaining c55% of our loan growth expectations through 2024e.
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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