Earnings Report /
Saudi Arabia

Bank AlJazira: Strong margins drive net income in Q1 21

  • Revenues grew 23.0% yoy (3.1% qoq) to SAR945mn and were higher than our estimates of SAR813mn

  • Operating expenses marginally declined by 0.6% yoy (6.8% qoq) to SAR432mn

  • BJAZ loan book growth remained muted, increasing 6.1% yoy (2.2% qoq) to SAR55bn

SNB Capital
26 April 2021
Published bySNB Capital

Bank Aljazira (BJAZ) reported a strong set of results with a net income of SAR322mn, up 77.1% yoy (net loss of SAR495mn in Q4 20). This compares with the NCBC and consensus estimates of SAR153mn and SAR206mn, respectively. The variance was due to a combination of 1) better NIMs, 2) higher fee and other income and 3) lower than expected provisioning expenses. Based on the last update published in March 2020, we are Neutral on BJAZ with a PT of SAR11.2. Since then, the stock recorded a strong rally of c60%. We await detailed financials to update our PT and estimates.

Revenues grew 23.0% yoy (3.1% qoq) to SAR945mn and were higher than our estimates of SAR813mn. Both, NSCI as well as fee and other income, drove the growth in revenue. NSCI increased 18.1% yoy (1.9% qoq) to SAR644mn (vs our estimates of SAR568mn). Fee and other income grew by 34.8% yoy (5.8% qoq) to SAR302mn and was higher than our estimate of SAR244mn.

Based on the initial estimates, NIMs increased by c30bps yoy to 2.8%, higher than our estimate of 2.4%. Asset yields declined by c50bps yoy to 3.5% (flat qoq) and were in-line with our estimates. Cost of funds declined by c93bps to 0.5% and was significantly lower than our estimates of 1.0%. We believe this is the key positive of the result.

Operating expenses marginally declined by 0.6% yoy (6.8% qoq) to SAR432mn and was largely in-line with our estimates of SAR428mn. Cost-to-income ratio came in at 46% vs 56% in Q1 20 and was also significantly lower than our estimates of 53%.

Impairment charges increased 25.3% yoy (-86.1% qoq) to SAR153mn, however were lower than our estimate of SAR212mn. Consequently, we estimate that cost of risk increased c20bps yoy to 1.1%, lower than our estimates of 1.5%.

BJAZ loan book growth remained muted, increasing 6.1% yoy (2.2% qoq) to SAR55bn. Deposits increased 12.8% yoy (3.9% qoq) to SAR71bn.

Based on our last update in March 2020, we are Neutral on BJAZ with a PT of SAR11.2. Since then, the stock recorded a strong rally of c60% to exceed our PT. We await detailed financials to update our PT and estimates. BJAZ trades at 2021f PB of 0.7x compared with the sector’s average of 1.5x.