Earnings Report /
Saudi Arabia

Albilad: 4Q 19 – Loan growth drives earnings growth

    SNB Capital
    5 February 2020
    Published bySNB Capital

    Bank Albilad (Albilad) reported an in-line set of results in Q4 19. The bank reported a net profit of SAR327mn in Q4 327mn vs a net loss of SAR136mn in Q4 18 (+ 0.2% qoq). On a recurring basis, the earnings are up +27.5% yoy. Q4 18 results included a one-off of SAR393mn related to zakat settlement for prior years. We believe the strong yoy performance is attributed to strong volume growth.

    NCBC view on the results

    Albilad reported an in-line set of results in Q4 19 with net income of SAR327mn vs. a net loss of SAR136mn in Q4 18. This compares with the NCBC and consensus estimates of SAR332mn and SAR318mn, respectively. Adjusting for the SAR393mn one-off expense towards zakat settlement in Q4 18, net income grew 27.5% yoy (flat qoq). Strong loan growth was the key earnings driver, with margins remaining resilient. 

    Revenues grew 15.4% yoy to SAR1,041mn (+1.7% qoq), coming in-line with our estimates. Revenue growth was largely driven by NSCI growth of 22.0% yoy (+3.0% qoq) to SAR735mn. Fee and other income grew 2.0% yoy (-1.4% qoq) to SAR306mn. 

    NSCI growth is attributed to strong growth in earning assets of 23.3% yoy (+5.9% qoq) to SAR70bn, coming higher than our estimates of SAR67bn. NIM remained unchanged yoy at 4.3%, as a drop in asset yields was offset by a drop in funding costs. 

    Operating expenses (including provisions) increased 10.5% yoy to SAR675mn, coming higher than our estimates of SAR643mn. We believe the variance is attributed to higher than expected provisioning charges. 

    Loans grew 17.3% yoy (+5.2% qoq) to SAR59bn while deposits grew 16.8% yoy (+4.3% qoq) to SAR67bn, higher than our estimates of SAR57bn and SAR65bn, respectively. L/D ratio remained flat at 88.9% vs 88.5% in Q4 18. Investments grew 69.9% yoy to SAR11bn while total assets grew 16.9% yoy to SAR86bn, above our estimates of SAR10bn and SAR82bn, respectively. 

    We are Neutral on Albilad with a PT of SAR26.9 as we believe resilient NIMs and strong loan growth are priced in. Albilad trades at a 2020f PB of 2.0x, above peer average of 1.8x.