Earnings Report /
Saudi Arabia

Banque Saudi Fransi: Higher revenues, lower provisions drive earnings

  • Revenues increased 3.1% yoy (+7.3% qoq) to SAR1.85bn, in-line with our estimate of SAR1.74bn

  • Operating expenses (ex-provisioning) remained flat (+20.5% qoq) at SAR601mn

  • BSFR’s loan book grew 13.9% yoy (+3.3% qoq) to SAR153bn

SNB Capital
24 April 2022
Published by

BSFR reported an in-line set of results with a net income of SAR875mn, up 12.2% yoy (-11.9% qoq). This compares to the SNB Capital and consensus estimates of SAR862mn and SAR874mn, respectively. The growth is primarily mainly attributed to lower provisioning and operating expense, which declined by 5.2% yoy (+64.1% qoq) and 1.7% yoy (+31.5% qoq), respectively.

  • Revenues increased 3.1% yoy (+7.3% qoq) to SAR1.85bn, in-line with our estimate of SAR1.74bn. NSCI increased 4.4% yoy (+0.9% qoq) to SAR1.34bn and was in-line with our estimate. Fee and other income declined marginally 0.2% yoy (+29.2% qoq) to SAR508mn, but was higher than our estimate of SAR431mn.

  • Based on our initial estimates, NIMs declined c15bps yoy to 2.5%, slightly higher than our estimate of 2.4%. Asset yields contracted c12bps yoy to 2.7% and were lower than our estimate of 2.9%. Cost of funds remained largely flat at 0.4% and in-line with our estimates.

  • Operating expenses (ex-provisioning) remained flat (+20.5% qoq) at SAR601mn and were marginally higher than our estimate of SAR590mn. As a result, cost to income ratio rationalized at 32.5% in Q1 22 from 33.5% in Q1 21, lower than our estimate of 33.9%.

  • Provisioning expenses declined by 5.2% yoy (+64.1% qoq) to SAR275mn, but was higher than our estimate of SAR194mn. Consequently, cost of risk declined c14bps yoy to 0.7% in Q1 22, compared to 0.9% in Q1 21 but was higher than our estimate of 0.5%.

  • BSFR’s loan book grew 13.9% yoy (+3.3% qoq) to SAR153bn, which was in-line with our estimate. We believe the growth in loan book is a key positive of the result. Deposits increased 13.4% yoy (+6.2% qoq) to SAR151bn, largely in-line with our estimate. The bank’s liquidity position is tightened further with L/D ratio of 101.3% in Q1 22 vs. 100.8% in Q1 21 (104.1% in Q4 21), lower than our estimate of 102.2%.

Outlook

We are Neutral on BSFR with a PT of SAR49.9. Based on our last update, BSFR trades at 2022f PB of 1.8x, higher than the 5-year average of 1.3x. The anticipated rate hikes are expected to be the main earnings driver for the bank while increasing competition, liquidity pressure and higher CoR are the main risks, which we believe justify our Neutral rating.