Shares in Samba Financial Group rose on Thursday after the bank reported a rise in yearly earnings. Samba’s shares retreated on Sunday on profit-taking following the rally at the end of last week.

Samba, Saudi Arabia’s third-largest bank by assets, reported a net profit for 2018 of 5.53 billion Saudi riyals ($1.47 billion), compared to a net profit of 5.02 billion Saudi riyal for the year 2017, up by 10 percent year-on-year.

An average of eight analysts’ forecasts showed that the bank would make a net profit of 5.59 billion riyals, according to a poll on Eikon.

Total revenue for special commissions/investments for 2018 amounted to 7.54 billion Saudi riyals, compared to 6.93 billion riyals a year ago.

Samba’s shares rose 2.22 percent on Thursday, but retreated 3.26 percent on Sunday, pushing Saudi Arabia’s index to close 0.76 percent lower for the day. So far in 2019, the bank’s stock has gained in value by 14.01 percent.

“Based on preliminary results, we note that Samba’s credit quality appears to be in good shape while volume growth continues to be soft,” Shabbir Malik, banking analyst at EFG Hermes, told Zawya by email.

At the end of 2018, loans and advances stood at 113.71 billion Saudi riyal, down 3.38 percent year-on-year. Customer deposits recorded 170.17 billion Saudi riyals in 2018, up 1.34 percent year-on-year.

Malik added that he sees Samba as well positioned to benefit both from rising interest rates as the bank has a high proportion of CASA deposits (current and saving deposits) and “a pick-up in corporate loan” activity, as the bank has a very liquid balance sheet.

The United States Federal Reserve raised its key overnight lending rate on December 19th 2018 for the fourth time in the year, to a range of 2.25 percent to 2.50 percent. The Saudi Arabian Monetary Agency raised its official repo rate by 25bps to 3.00 percent following the Fed’s decision, as its currency is pegged to the dollar.

S&P Global Ratings predicted in a recent report that the Fed will raise rates three more times in 2019, taking the benchmark Federal Funds rates to 3.00-3.25 percent.

In a note sent to clients on Sunday which was seen by Zawya, Al Rajhi Bank's analysts said there was "likely no major rise in provisions as was feared, because Samba was one of the Banks which lent to now defaulted Saudi unit of Cyprus-based Joannou & Paraskevaides Group".

The note added that provisions and operational expenditures (OPEX) dropped 10 percent year-on-year and quarter-on-quarter.

Bloomberg reported late in November that the Saudi unit of Cyprus-based Joannou & Paraskevaides Group defaulted on about 7 billion riyals ($1.9 billion), citing people with knowledge of the matter. It added that lenders which include Samba Financial Group, Arab National Bank, Alawwal Bank, Banque Saudi Fransi, Emirates NBD and Saudi British Bank don’t expect to recover much of the money from the unit, according to the people familiar with the matter.

A letter claiming to represent 5,000 of the employees of Joannou & Paraskavevaides based in Saudi Arabia, which has been seen by Zawya, says that the unit's 5,000 employees are owed a total of up to 125-150 million Saudi riyals. (Read more here).

Elsewhere in the region, Dubai’s index edged 0.16 percent lower on Sunday, Abu Dhabi’s index dropped 0.2 percent, Kuwait’s premier market index gained 0.25 percent, Qatar’s index edged 0.26 percent lower while Oman’s index fell 0.8 percent, Bahrain’s index gained 0.48 percent and Egypt's blue-chip index EGX30 edged 0.29 percent lower.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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