Earnings Report /
Saudi Arabia

Albilad: Q2 22 review – Loan growth continue to drive earnings

  • Revenue grew by 10.8% yoy (-0.9% qoq) to SAR1.25bn, marginally lower than our estimate of SAR1.31bn.

  • Based on our initial estimates, NIMs remain flat at 3.6%, marginally lower than our estimate of 3.8%.

  • Loan growth is the key highlight of the result. Albilad’s loan book grew 15.3% yoy (+5.6% qoq) to SAR91bn.

SNB Capital
27 July 2022
Published bySNB Capital

Bank Albilad reported a strong set of Q2 22 results, with net income growing by 22.8% yoy (+4.2% qoq) to SAR511mn. This is higher than the SNB Capital and consensus estimates of SAR485mn and SAR492mn, respectively. The growth in net income was primarily due higher NSCI, which grew by 13.6% yoy (+1.3% qoq). The strong loan book growth (+15.3% yoy, +5.6% qoq) is the key highlight of the result.

  • Revenue grew by 10.8% yoy (-0.9% qoq) to SAR1.25bn, marginally lower than our estimate of SAR1.31bn. The yoy growth in revenues was driven by 13.6% (+1.3% qoq) increase in NSCI. Fee and other income grew only by 2.6% yoy (-7.5% qoq), in-line with our estimates.

  • Based on our initial estimates, NIMs remain flat at 3.6%, marginally lower than our estimate of 3.8%. Asset yields increased by c37bps yoy to 4.3% in Q2 22, largely in-line with our estimate. Funding costs increased by c49bps yoy to 0.8% and was in-line with our estimate. We believe increasing yields and funding costs are common themes that were noticed across the sector in Q2 22 which we believe are attributed to increasing interest rates.

  • Pre-provision expense stood at SAR563mn (+6.0% yoy, +0.9% qoq) but was lower than our estimate of SAR599mn. Cost-to-income ratio declined to 44.9% in Q2 22 vs 47.0% in Q2 21 and our estimate of 45.7%. The ongoing rationalization of the cost-to-income ratio is a key positive.

  • Provisioning expenses declined by 11.8% yoy (-25.0% qoq) to SAR120mn, lower than our estimate of SAR172mn. Consequently, cost of risk declined to 0.5% compared to 0.7% in Q2 21.

  • Loan growth is the key highlight of the result. Albilad’s loan book grew 15.3% yoy (+5.6% qoq) to SAR91bn. Deposits grew 9.2% yoy (+3.5% qoq) to SAR89bn vs our estimate of SAR80bn. The bank’s liquidity position further tightened to 102.4%, compared to 96.9% in Q2 21 and 100.4% in Q1 22.

Outlook

Based on our last update, we are Neutral on Albilad with a PT of SAR47.7. Albilad trades at 2022f P/B of 3.4x, higher than the historical average of 1.7x. We believe lower impairment expenses and steady loan growth are the key positives. Moreover, we believe the impact of rate hikes has started to be reflected on yields.