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|31 January, 2019

Riyad bank stocks trade higher after bank announces surge in Q4 earnings, beating estimates

Riyad Bank announced a 38.6 percent rise in Q4 profit, says result due to fall in provisions and cost of deposits

A Saudi trader works at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose.

A Saudi trader works at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose.

REUTERS/Fahad Shadeed

Shares in Saudi Arabia’s Riyad Bank rose on Thursday, as the bank reported a 38.6 percent surge in fourth quarter (Q4) net profit 2018.

Riyad Bank, Saudi Arabia’s fourth-largest lender by assets, recorded a Q4 net profit for 2018 of 1.35 billion Saudi riyals ($360 million), compared to 974 million Saudi riyals for Q4 2017, beating analysts’ estimates.

For the full year, the bank’s net profit stood at 4.72 billion Saudi riyals, compared to a net profit of 3.95 billion Saudi riyals for 2017, translating into a 19.4 percent increase.

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“What was different for Riyad Bank from the other banks this quarter (Q4 2018) was the marginal decline in cost of deposits along with a likely decline (both sequentially and annually) for provisions,” Pritish Devassy, head of equity research at Saudi-based Al Rajhi Capital, told Zawya by email.

Quick deposit costs stood at 1.05 percent in Q4 2018, down from 1.15 percent in Q3 2018, while provisions, salaries and other costs declined 5 percent year-on-year and 8 percent quarter-on-quarter, according to Al Rajhi Capital's calculations.

Devassy said that the decline in cost of deposits and provisions helped the bank beat market expectations and “could also help Riyad Bank get a better valuation in its merger with NCB”.

Riyad Bank and National Commercial Bank announced late in December that they have begun preliminary discussions about a potential merger. (Read more here).

On Thursday, Riyad Bank’s shares rose 2.07 percent, while Saudi Arabia’s index ended the day 0.28 percent lower. So far in 2019, the bank’s shares have gained 14.93 percent.

According to data from Eikon, two analysts have a ‘buy' rating on the bank’s stock, four analysts have a 'hold' rating, and two analysts rated the stock as ‘sell’.

Chiro Ghosh, research manager at Bahrain-based investment bank SICO, said in a note seen by Zawya: “Despite the recent rally in all Saudi banks and limited upside from here on, we believe the result would provide more steam to Riyad Bank.”

A Thomson Reuters index of Saudi banks has gained 13.87 percent so far in 2019, data from Eikon showed on Thursday.

“Clients with a short-term investment horizon, can consider taking fresh position at current levels,” Ghosh added.

Riyad Bank was last trading at 22.5 Saudi riyals at the end of Thursday’s session.

Elsewhere in the region, Dubai’s index gained 1.14 percent on Thursday, Abu Dhabi’s index rose 0.8 percent, Qatar and Bahrain’s indices were mainly flat, Oman’s index fell 1.17 percent and Kuwait’s premier market index edged 0.15 percent lower.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2019

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