Chiro Ghosh, research manager at Bahrain-based investment bank SICO, said that the bank exceeded its estimate “on the back of lower provisioning of SAR (Saudi riyal) 404mn (million), down 34% QoQ (quarter on quarter) but up 47% YoY (year on year).”
“We see this as a mixed result with positives from NIM (net interest margin) expansion, lower provisioning and steady operating expenses, while on the other hand (a) weak balance sheet performance,” Ghosh added.
SICO estimated that the bank's net interest margin improved by 19 basis points year-on-year, and said that NCB’s lending book declined by 1.1 percent quarter-on-quarter, with deposits falling 2.2 percent.
“We believe weak lending book growth was driven by both its Turkey and Saudi operation, although we await detail(ed) results for more clarity,” ’s Ghosh said.
Investors were concerned last year about banks with exposure to Turkey following a run on its currency, the lira, in August. Although a recovery was made, the lira finished the year 28.4 percent lower against the dollar, according to data from Eikon. Arqaam Capital estimates NCB’s exposure to Turkey as 8 percent of its assets and 12 percent of its loans, according to a Reuters report.
For the whole of 2018, NCB reported a net profit of 10.67 billion Saudi riyals, an 8.9 percent increase on the 9.8 billion Saudi riyal net profit achieved in 2017.
Total revenue for special commissions/investments amounted to 18.31 billion Saudi riyals, versus 16.98 billion Saudi riyal last year.
At the end of 2018, loans and advances stood at 265.32 billion Saudi riyals, up 6.45 percent year-on-year. Customer deposits recorded 318.7 billion Saudi riyals in 2018, up 1.34 percent year-on-year.
“On an annual basis, provisions declined by 28.8% which is positive,” Al Rajhi capital said in a note published on Tuesday.
National Commercial Bank and Riyad Bank began preliminary discussions to merge in December 2018. NCB said any agreement would be subject to regulatory and shareholder approvals.
According to data from Eikon, two analysts have a ‘strong buy' rating on NCB’s stock, two analysts have a 'buy' rating, four analysts rated the stock as ‘hold’ and one analyst rated the stock as a ‘sell’.
Elsewhere in the region, Dubai’s index edged 0.2 percent lower on Tuesday, Abu Dhabi’s index was mainly flat, Qatar’s index dropped 0.33 percent, Kuwait’s premier market index edged 0.15 percent higher, while Bahrain’s index gained 0.19 percent, Oman’s index was mainly flat and Egypt's blue-chip index EGX30 dropped 0.74 percent.
(Reporting by Gerard Aoun; Editing by Michael Fahy)
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