Saudi British Bank’s (SABB) Q4 2016 net profit dropped 35 percent to SAR 607 million year-on-year (YoY), missing market expectations of nearly SAR 1 billion, Riyad Capital said in an earnings report.
The lender’s Q4 earnings also came 39 percent lower quarter-on-quarter (QoQ).
“We estimate total impairments of close to SAR 530 million; this follows from higher levels of SAR 190 million in Q3 versus an average of SAR 124 million for the preceding two quarters,” the brokerage said.
SABB’s net special commission income (NSCI) for Q4 matched Riyad Capital’s estimates of SAR 1.2 billion, up 15 percent YoY and 1 percent QoQ.
While special commission income was flat QoQ, special commissions expenses declined by 3 percent QoQ, indicating that the bank has avoided taking in high cost deposits, the report said.
The bank’s net loans declined by almost SAR 5 billion in Q4 to SAR 121 billion after having started the year at SAR 125 billion, due to a decline in fresh credit demand and payback of existing loans.
“The net effect of the above has been a minor decline in the loan-to-deposit ratio to 83.3 percent at the end of Q4, versus 84.7 percent a quarter earlier, giving it plenty of room to expand in Q1 2017,” the report said.
The brokerage raised the stock’s target price to SAR 27 per share from SAR 24 and maintained its ”Neutral” rating, noting that 2017 may be a tough year for SABB.
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