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|19 February, 2019

BBK outperforms Bahraini stocks on strong earnings

Shares in Bahrain's BBK rose 9.78 percent on Tuesday, pushing Bahrain's stock market index to close the day in green territory

Traders look at the screens at Bahrain Bourse in Manama, Bahrain, February 7, 2018.

Traders look at the screens at Bahrain Bourse in Manama, Bahrain, February 7, 2018.

REUTERS/Hamad I Mohammed

Shares in Bank of Bahrain and Kuwait (BBK) rose sharply on Tuesday as the bank announced strong earnings for 2018.

The bank’s full-year 2018 net profit attributable to shareholders rose by 14.3 percent year-on-year to 67.1 million Bahraini dinars ($177.99 million), compared to 58.7 million dinars for 2017.

The bank recorded a net profit attributable to shareholders of 18.7 million dinars for the fourth quarter (Q4) of 2018, an increase of 35.5 percent on the 13.8 million dinars achieved during Q4 2017.

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Sumaya AlJazeeri, a senior analyst at Bahrain-based bank SICO, told Zawya by email that the strong Q4 2018 earnings were driven by higher net interest income ”supported by strong NIMs (net interest margin), which reached 3.5% in 4Q18”.

“The bank’s fee income growth has also been solid at 7% YoY (year-on-year) in 2018 in line with BBK’s robust retail lending growth,” AlJazeeri added.

BBK achieved 42.2 million dinars of operating revenues in Q4 2018, an increase of 18.9 percent on the 35.5 million dinars earned in Q4 2017.

AlJazeeri said, however, that on the balance sheet side, “QoQ (quarter on quarter) decline in both lending and deposits is a bit surprising to us, possibly as a result of the bank deleveraging its loan book and selectively increasing its corporate exposure”.

Loans and advances dropped by 75 million dinars in Q4 2018, while deposits dropped by 25 million dinars.

BBK’s stock gained 9.78 percent on Tuesday, and was the best performer on the Bahraini index, which closed 0.96 percent higher for the day. Since the start of 2019, the bank’s shares have gained 11.23 percent in value.

The bank’s board of directors recommended a cash dividend of 40 percent of the share capital for 2018, equivalent to 40 fils per share.

“The bank’s generous 40% cash dividend is also positive, which came in higher than our expectation of 35% implying 8%-plus yield at (the) current price, placing it among the highest-yielding bank stocks in the region,” SICO’s AlJazeeri ended.

On December 19 2018, ratings agency Moody’s Investors Service affirmed the long-term deposit and issuer ratings of BBK, and changed the outlook for the bank to stable from negative.

Elsewhere in the region, Dubai’s index added 0.6 percent on Tuesday, Abu Dhabi’s index traded largely flat, Saudi Arabia’s index dropped 0.65 percent, Qatar’s index fell 0.52 percent while Kuwait’s premier market index gained 0.72 percent and Oman’s index dropped 0.42 percent.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(Gerard.aoun@refinitiv.com)

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© ZAWYA 2019

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