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Al Rajhi Bank, Saudi Arabia’s second-largest lender by assets reported a rise in first quarter (Q1) net profit for 2019, triggering a surge in the bank’s shares on Wednesday.
The bank’s Q1 2019 net profit amounted to 2.89 billion Saudi riyals ($770.75 million), compared to 2.38 billion riyals in Q1 2018, translating into a 21.43 percent increase.
Karim Kekhia, equity research analyst at Arqaam Capital, told Zawya by email that the bank’s “robust earnings growth” accelerated in Q1 2019. He said earnings were “supported by (an) adjustment in asset yields, barely any pressure on CoF (cost of funds) and sound asset quality.”
Kekhia added that the bank had witnessed a net interest margin (NIM) expansion of 43 basis points year-on-year, thanks to stable funding costs ( up 4 basis points year-on-year), and higher asset yields ( up 46 basis points).
The bank’s Q1 total revenue for special commissions/investments amounted to 4.09 billion riyals, compared to 3.56 billion riyals in Q1 2018, a 14.89 percent increase.
“We maintain our buy on the name despite valuation being full primarily due to continued flows from MSCI and continued double-digit EPS growth, though this should peter out somewhat over the course of the next quarters,” Kekhia ended.
The bank’s shares rose 1.59 percent on Wednesday to 76.5 riyals and have added 33.8 percent so far since the start of the year.
(Reporting by Gerard Aoun; Editing by Michael Fahy)
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