We maintain our Neutral rating on AlRajhi with a PT of SAR79.9. We expect the loan growth to slowdown in 2023f on the back of a deceleration in mortgage loans. Furthermore, the bank’s tight liquidity position along with retail focused loan book would keep margins under pressure. Hence, we have revised down our earnings estimates by c3.6% for 2023-2024f. We expect the bank to deliver a 3-year earnings (2022-2025f) CAGR of 15.9%, translating into an average ROE (after Tier I) of 21.7%. The stoc...
Although AlRajhi Bank reported an in-line set of Q4 22 results, we believe the underlying result trends indicate weakness. Net income grew by 9.8% yoy (+1.1% qoq) to SAR4.41bn (+1.1% qoq) and was is in-line with the SNB Capital and consensus estimates of SAR3.43bn and SAR4.39bn, respectively. However, the significant increase in cost of funds and cost to income ratio are the key highlights. Loan book increased by 25.5% yoy (+1.9% qoq) to SAR568bn, but lagged our estimates of SAR580bn. * Tota...
Overview of Q3 22 results * AlRajhi reported an in-line set of Q3 22 results, with net income increasing by 14.8% yoy (+2.3% qoq) to SAR4.35bn. * The growth in net income was primarily driven by higher net special commission income (+9.1% yoy and +2.2% qoq) and supported by a decline in cost-to-income ratio to 25.8% in Q3 22 vs 26.7% in Q3 21. * Adjusted for Tier 1, net profit stood at SAR4.32bn, up 13.7% yoy (+2.9% qoq). * NIMs declined c56bps to 3.1% in Q3 22, in-line with ...
AlRajhi reported an in-line set of Q3 22 results, with net income increasing by 14.8% yoy (+2.3% qoq) to SAR4.35bn. This compares with the SNB Capital and consensus estimates of SAR4.38bn and SAR4.39bn, respectively. The growth in net income was primarily driven by higher net special commission income (+9.1% yoy and +2.2% qoq) and supported by a decline in cost-to-income ratio to 25.8% in Q3 22 vs 26.7% in Q3 21. Adjusted for Tier 1, net profit stood at SAR4.32bn, up 13.7% yoy (+2.9% qoq). Th...
EARNINGS CALL SUMMARY - ALRAJHI Q2 22 Below are the key highlights of Alrajhi Q2 22 earnings call. The key highlight of the call was that the management guidance remains unchanged compared to the previous quarter. Loan growth for FY 22 is expected to be in the low twenties, contraction in net profit margins are expected between -55bps to -65bps. Cost to income is expected to stay below 26.5% and ROE between 23%-24%. I have also attached Q2 22 result analysis and earnings presentation for your...
We remain Neutral on Al Rajhi with a PT of SAR94.3. The bank succeeded in growing market share (particularly in mortgages) and consistently exceeded its own guidance over the past two years. This, along with robust growth in fee & commission income, cost optimization and limited NPLs translated into best-in-class return profile. Going forward, we expect loan growth to remain strong but the impact of the foreseen interest rate hikes on NIMs is expected to be muted due to longer loan book durat...
Al Rajhi reported a net income of SAR4.01bn in Q4 21, up 28.5% yoy (+5.7% qoq). This is slightly higher than SNB Capital and consensus estimates of SAR3.80bn and SAR3.88bn, respectively. The growth was primarily driven by an increase in operating income (+18.3% yoy; +4.2% qoq), on the back of strong growth in the loan book. The strong loan growth is a key highlight of the results, which increased by 43.4% yoy (+7.6% qoq) to SAR453bn. The bank accounted for c50% of new loan originations in 202...
AL RAJHI BKG.& INVCORP. (SA), a company active in the Money Center Banks industry, is favoured by a more supportive environment. The independent financial analyst theScreener has confirmed the fundamental rating of the title, which shows 3 out of 4 stars, as well as its unchanged, moderately risky market behaviour. The title leverages a more favourable environment and raises its general evaluation to Slightly Positive. As of the analysis date January 7, 2022, the closing price was SAR 142.40 and...
Al Rajhi reported a net income of SAR3.79bn in Q3 21, increasing by 42.7% yoy (+5.2% qoq). This compares to the SNB Capital and consensus estimates of SAR3.65bn and SAR3.80bn, respectively. The growth in net income was driven by higher revenues (+27.7% yoy, +3.8% qoq) on the back of a remarkable growth in the loan book which increased by 45.3% yoy (+7.9% qoq). * Revenues grew by 27.7% yoy (+3.2% qoq) to SAR6.58bn and was marginally higher than our estimate of SAR6.45bn. NSCI increased 24.3% ...
We remain Neutral on AlRajhi with a PT of SAR112.2. AlRajhi’s asset quality remains robust with a comfortable liquidity position. Therefore, we expect loans growth to remain strong (+36% yoy) despite the mortgages slowdown. Moreover, we expect the cost optimization measures to provide support to profitability. We expect earnings to grow at a CAGR of 20% during 2020-23f, leading to ROE expansion from c19% in 2020 to 25% in 2023f. The stock trades at 2021f PB of 4.7x, 85% higher than the histor...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
Al Rajhi reported a strong set of Q2 21 results, with net income increasing by 48.1% yoy (+8.1% qoq) to SAR3.60bn. This compares to the SNB Capital and consensus estimates of SAR3.48bn and SAR3.51bn, respectively. The growth in net income was driven by higher revenues (+31.8% yoy; +6.5% qoq), which offset the increase in provisioning expenses (+27.5% yoy; +1.2% qoq). The key highlight of the result is the strong growth of 42.0% yoy (+9.6% qoq) in the loan book. * Revenues increased by 31.8% ...
We retain our Neutral rating on AlRajhi with a revised PT of SAR84.2. AlRajhi strong retail franchise makes it a key beneficiary of the exponential growth in the mortgage market. Solid asset quality, ample liquidity and strong capital position are also its key strengths. We expect earnings to grow at a CAGR of 13.1% during 2020-2025f, leading to ROE of 24.2% by 2025f. The stock trades at 2021f PB of 3.4x, 127% premium over the sector’s average which we believe is justified due to high profita...
Al Rajhi reported net income of SAR2.66bn in Q3 20, down -3.0% yoy (+9.1% qoq). The results are higher than the NCBC and consensus estimates of SAR2.39bn and SAR2.47bn, respectively. We believe the variance is due to higher than expected fee and other income of SAR956mn and lower than expected provisioning expense of SAR465mn. The key highlight of the results is the strong loan growth of +18.5% yoy. We are Neutral on Al Rajhi with a PT of 57.3. Since our last report published in March 2020, t...
AlRajhi reported a stronger than expected set of Q2 20 results, with a net income of SAR2.44bn. This is higher than the NCBC and consensus estimates of SAR2.04bn and SAR2.03bn, respectively. The variance is primarily on account of lower than expected provisions, which came in at SAR458mn vs. our estimate of SAR988mn. Strong loan growth of +17.1% yoy was a major positive of the result. Revenue declined -1.1% yoy (-3.2% qoq) to SAR4.81bn, however it is marginally higher than our estimate of SAR...
AlRajhi Bank reported a weaker than expected set of results in Q1 20, with net income declining by -7.3% yoy (+9.2% qoq) to SAR2.38bn. This is lower than the NCBC and consensus estimates of SAR2.66bn and SAR2.80bn, respectively. We believe the variance is due to a combination of lower margins and higher provisioning expense. Strong loan growth of +11.3% yoy was a major positive of the result. From a broader perspective, we believe higher provisioning is a negative read-across for the sector. ...
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 (
In this report we provide our Q3 19 net income and EPS estimates for the companies under our Saudi coverage. We also identify where we expect to see positive or negative earnings surprises. We expect positive surprises from many of the consumer stocks, while some of the petrochemicals could disappoint.
Post the first cut in rates in over a decade, the US Fed interest rate outlook has changed. Markets now expect at least another 25bps rate cut by the end of 2019. We expect rate cuts to create earnings headwinds for Saudi banks, but better than expected asset spreads should soften the impact. Nevertheless, considering the cost of risk adjustment, we lower our combined EPS estimates by 3-12% over 2019-23f.
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