Saudi British Bank (SABB) reported a rise in net profit for the first quarter (Q1) of 2019 on Monday, triggering a rally in the bank’s shares.

Q1 2019 net profit stood at 1.29 billion Saudi riyals ($343.93 million), compared to 1.04 billion riyals in Q1 2018, a 24.04 percent increase, beating investment bank SICO’s estimate by 10 percent.

“We see this as a strong result across business lines and expect the market to react positively,” Chiro Ghosh, research manager at SICO bank, told Zawya.

SABB’s Q1 2019 total revenue for special commissions/investments reached 1.80 billion riyals, up 16.88 percent from Q1 2018’s revenue of 1.54 billion riyals.

Ghosh said, however, that “the bank’s balance sheet performance was muted, with deposits declining by 2.5 percent QoQ (quarter-on-quarter), while (the) lending book remained flat.”

Loans and advances in Q1 2019 amounted to 110.36 million riyals, compared to 116.5 million riyals in Q1 2018. Customer deposits also dropped to 127.24 million riyals in Q1 2019, from 135.39 million riyals in Q1 2018.

The bank’s “lending book performance continues to disappoint, with its lending book declining in nine out of the past 11 quarters,” he added.

The bank’s shares were trading 2.5 percent higher by 13:16 GST on Monday at 41 riyals, and have added 25.57 percent so far since the start of 2019.

“Merger with Alawwal Bank would be the near-term trigger for the bank,” Ghosh added.

A $5 billion merger between SABB and its smaller rival Alawwal Bank was first announced last year. SABB said earlier this week that it had secured regulatory approval to hold an extraordinary meeting for shareholders to vote on the deal. The meeting is set to take place on May 15. If a deal is approved, the merger is set to create the third-biggest lender in Saudi Arabia. (Read more here).

In a press release announcing the bank's results on Monday, chairman Sheikh Khaled Olayan said: “SABB accomplished a strong financial performance in the first quarter of 2019, growing revenue and managing underlying cost inflation.”

Olayan added that he expected the merger with Alawwal to be completed in June, subject to approvals.

(Reporting by Gerard Aoun; Editing by Michael Fahy)


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