Riyad Bank’s Q3 net profit beats forecasts, says SICO

Riyad Bank’s Q3 2018 net profit of SAR 1.16 billion came 12 percent above SICO investment bank’s estimates of SAR 1.04 billion, driven by strong top line performance with its net interest income rising by 10.6 percent year-on-year (YoY) and non-interest income by 7.7 percent YoY.

The bank’s loan portfolio grew by 1 percent quarter-on-quarter (QoQ), supported by sequential rises of 3.8 percent in deposits and of 5 percent in assets, the Bahrain-based investment bank said in an earnings note.

Riyad Bank is likely to report a 6 percent YoY lending book growth in 2018, outpacing the sector’s growth of almost 4 percent.

“Riyad bank has been in a consolidation phase for the past few years, as it cleaned up its delinquent loans. We estimate that it wrote-off delinquent loans worth SAR 5bn (3.6% of total loans) over the past 3 years,” SICO added.

Net interest margins (NIM) increased 27 basis points (bps) YoY (4 bps QoQ).

The full-year NIM is likely to rise 24 bps, compared to peers’ average of 12 bps - the strongest expansion among Saudi banks supported by a surge in current deposits.

SICO added that it reaffirmed its ‘Buy’ recommendation on the stock, upping its target price to SAR 19 from SAR 17.5.

The stock is expected to offer a dividend yield of 4.7 percent, the report added.