Banque Saudi Fransi’s (BSF) net income of SAR 1.01 billion missed Riyad Capital’s estimates of SAR 1.08 billion as well as market consensus of SAR 1.05 billion, on lower non-core income and higher opex, the brokerage said in an earnings review.
“We are concerned with the 21 percent quarter-on-quarter (QoQ) drop in non-core income to SAR 463 million, lowest for over two years and likely a result of reduced fee-based, exchange and dividend income,” Riyad Capital said, adding that BSF also appears to have booked slightly higher provisions for Q2.
Provisions were expected to rise to SAR 45 million this quarter, but the actual number came in over SAR 50 million, the report said.
Operating expenses rose 5 percent QoQ to SAR 625 million versus forecast of SAR 605 million.
Meanwhile, deposits surged by almost SAR 5.5 billion in Q2, while the loan-to-deposit ratio declined from 78.1 percent in Q1 to 75.8 percent, well below the 90 percent cap.
“As rates move up, the bank has the opportunity to take advantage with room to grow on the advances front,” Riyad Capital said.
The brokerage raised its target price on the stock from SAR 33 to SAR 35 and maintained a “Buy” recommendation.
“Trading at 0.9x 2017E P/B, the bank remains one of our picks in the banking sector on business strength,” it added.
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