Earnings Report /
Saudi Arabia

Alinma: Q3 22 review – Strong loan growth a key positive of results

  • Revenues grew by 20.5% yoy (+7.4% qoq) to SAR2.08bn and was in-line with our estimate of SAR2.04bn

  • NIMs expanded c18bps yoy to 3.5%, higher than our estimates. Yield on earning assets increased by c74bps yoy to 4.7%

  • Operating expenses (ex-provisions) grew by 15.2% yoy (+7.0% qoq) to SAR710mn

SNB Capital
27 October 2022
Published bySNB Capital

Alinma reported an in-line set of results, with net income of SAR989mn, up 34.0% yoy (+6.9% qoq). This is in-line with the SNB Capital and consensus estimate of SAR988mn and SAR952mn, respectively. The yoy improvement is largely due to strong growth in revenue (+20.5% yoy, +7.4% qoq), supported by growth in both NSCI and, Fee and other income. Key positive of the result was strong +6.7% qoq growth in the loan book the 2nd highest in sector after AlRajhi. Net income adjusted for Tier 1 Sukuk was at SAR956mn (up 37.4% yoy, 9.3% qoq).

  • Revenues grew by 20.5% yoy (+7.4% qoq) to SAR2.08bn and was in-line with our estimate of SAR2.04bn. NSCI increased by 20.2% yoy (+18.4% qoq) to SAR1.67bn and was higher than our estimate of SAR1.49bn. Fees and other income, increased 21.3% yoy (-22.5% qoq) to SAR402mn and was lower than our estimate of SAR545mn.

  • NIMs expanded c18bps yoy to 3.5%, higher than our estimates. Yield on earning assets increased by c74bps yoy to 4.7% in Q3 22 and was ahead of our estimate of 4.3%. The cost of funding increased by c75 bps due to higher interest rates of 1.1%, in-line with our estimates.

  • Operating expenses (ex-provisions) grew by 15.2% yoy (+7.0% qoq) to SAR710mn. Cost-to-income ratio declined to 34.2% in Q3 22 vs 35.8% in Q3 21 but was marginally lower than 34.2% in previous quarter.

  • Provisioning expenses continued to decline yoy to SAR264mn, but was in-line with our estimate of SAR256mn. The yoy decline in provisions is a common theme across the sector.

  • Alinma’s loan book grew by 15.4% yoy (+6.7% qoq) to SAR140bn and higher than our estimate of SAR134bn. We believe this is a key positive of the results and is the 2nd highest loan growth on quarterly basis in the sector. Deposits grew 13.2% yoy (+1.3% qoq) to SAR132bn, in line with our estimates. Consequently, the bank’s liquidity position tightened significantly from 104.0% in Q3 21 to 106% in Q3 22, which might lead to a further increase in cost of funds.

Outlook

We are Neutral on Alinma with a PT of SAR38.2. Currently, Alinma trades at 2023f P/B of 2.3x, higher than the peer average of 2.0x. We believe that the current interest rate environment bodes well for the bank.