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|07 May, 2019

Saudi’s Alawwal reports drop in first quarter earnings, lags estimates

The bank continues to lag peers in terms of funding structure, profitability and asset quality, analyst says

Traders monitor stock prices on screens at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose

Traders monitor stock prices on screens at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose

REUTERS/Faisal AlNasser

Saudi Arabia’s Alawwal Bank reported a drop in first quarter (Q1) earnings, falling below analysts’ expectations and driving the stock price lower early on Tuesday.

The bank’s net profit amounted to 219.5 million Saudi riyals ($58.52 million) in Q1 2019, compared to 286.1 million riyals in Q1 2018, a 23.28 percent drop.

“The lower net profit is driven by higher cost of risk, up by 31.4 percent vs Q1 2018,” the bank said in a press release published on Monday.

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The bank’s Q1 2019 total revenue for special commissions/investments amounted to 917.9 million riyals, a 2.13 percent increase on the Q1 2018 revenue figure of 898.8 million riyals. Despite this, the total amount of loans advanced and customer deposits taken both fell.

“AlAwwal continued to underperform during the quarter, where loans dropped by 3.4 percent and deposits declined by 4.2 percent on a sequential basis,” Monsef Morsy, co-head of research at Cairo's CI Capital told Zawya by email, adding that the bank’s bottom line missed CI Capital’s estimate by 29 percent.

Alawwal Bank’s loans and advances portfolio stood at 55.79 billion riyals in Q1 2019, while customer deposits reached 61.85 million riyals.

“The bank continues to lag peers in terms of funding structure, profitability and asset quality,” Morsy added.

Alawwal’s shares were trading 1.32 percent lower on Tuesday at 18 riyals by 11:57 GST but have gained 19.21 percent since the start of 2019.

Investors are awaiting a $5 billion merger between Saudi British Bank (SABB) and its smaller rival Alawwal Bank, which was first announced last year.

SABB said late in April 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)

Alawwal bank’s chairman Mubarak Al-Khafra said in the press release accompanying its earnings announcement: “This is an exciting time for Alawwal bank as we are working to finalise the proposed merger with Saudi British Bank (SABB).”

“With regulatory approvals obtained, shareholders will be voting on the transaction at an Extraordinary General Meeting on 15 May 2019. We hope to complete the transaction in June - subject to shareholder approval,” Al-Khafra added.

(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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