Strategy Note /
Global

Riyad Bank Q3 22 Earnings call summary

  • The bank reported a net income of SAR1.83bn in Q3 22, up 18.5% yoy (1+3.4% qoq).

  • Total loans and advances increased 14.8% yoy (+0.8% qoq) to SAR242bn

  • Total customer deposits increased by 15.8% yoy (-0.7% qoq) to SAR237bn

SNB Capital
16 November 2022
Published bySNB Capital

Riyad Bank Q3 22 Earnings call summary

  • The bank reported a net income of SAR1.83bn in Q3 22, up 18.5% yoy (1+3.4% qoq). Adjusting for Tier 1 sukuk cost, the net income increased by 15.7% yoy (+9.3% qoq) to SAR1.77bn.

  • The growth primarily came from strong growth in the NSCI (+34.8% yoy, 11.5% qoq) which offset the impact of higher operating and provisioning expense.

  • The bank loan book increased by +14.8% yoy (+0.8% qoq), but we highlight it is one of the lowest in the sector. According to SAMA, sector’s loan book increased by +15.3% yoy (+3.3% qoq).

  • The group in the NSCI primarily came from NIMs, which increased to 3.16% in Q3 22 vs 2.80% in Q3 21 and 3.0% in Q2 22.

Loan growth

  • Total loans and advances increased 14.8% yoy (+0.8% qoq) to SAR242bn, with commercial loan comprising of 62% of the total book. This takes ytd loan growth to 11%.

  • Retail book comprises of 35% of the total book, of which mortgages account for 65% of the total retail book (or 23% of the total loan book).

  • Mortgage loan book increased by c24% yoy to cSAR56bn as of Q3 22 and accounted for c33% of the new loan origination in 2022 ytd. Numbers suggest mortgages accounted for c100% of the new loan origination in Q3 22.

  • Guidance: The management highlighted that higher interest rates may potentially impact the future loan draw down. However, kept the loan growth guidance to mid-teens for 2022.

Deposits and funding

  • Total customer deposits increased by 15.8% yoy (-0.7% qoq) to SAR237bn.

  • NIBD constitute 63% of the total deposits in Q3 22 vs. 65% inn Q3 21 and 64% in Q4 21.

NIMs

  • NIMs increased to 3.16% in Q3 22 vs 2.80% in Q3 21 and 3.0% in Q2 22.

  • The increase was primarily due to substantial increase in the asset yields, which increased to 4.17% in Q3 22 vs 3.08% in Q3 21 and 3.59% in Q2 22.

  • The management highlighted that majority of the corporate book is based on 3-month SAIBOR and the impact of recent rate hike will be gradual on the loan book. They also added that impact on cost of funds would be more immediate vs asset book impact.

  • The management also highlight that due to fresh liquidity in the system (on the day of the call) the spread between LIBOR and SAIBOR has come down by 30bps. However, they did not disclose the nature and source where the liquidity has come from.

  • Guidance: Management expects NIMs to expand by 10-20 bps in 2022.

Cost of risk

  • Cost of risk stood at 0.37% in 9M 22 vs 0.4% in the same period last year.

  • NPL ratio decreased to c1.55% in Q3 22 vs 1.66% in Q2 22, while coverage decreased from 119% in Q2 22 to 115% in Q3 22. 

  • Guidance: The management expect cost of risk to remain in the range of 40-60bps in 2022.

 

Cost to income ratio

  • Cost to income ratio decreased to 33.3% in Q3 22 vs 35.8% in Q3 21. However, it increased marginally from 32.9% in Q2 22.

  • Cost to income ratio to remain below in 2022.