News Column

Saudi Hollandi Bank reports Q2 profit up 28 per cent on year-ago

July 6, 2014

Saudi Hollandi Bank reported net profit for Q2 2014 of SAR 480.25 million, up from SAR 374.79 million in the same quarter last year and up 15.18 per cent from SAR 416.97 million in Q1. Total Q2 profit was SAR 811.24 million, up almost 17 per cent on year ago levels.

Net profit for H1 2014 was SAR 897.21 million, up 24.43 per cent. Total assets rose 17.08 percent to SAR 89,489.32 million. Investments rose 26.39 per cent to SAR 19,065.23 million. Loans and advances were up 17.2 per cent at SAR 60,447.96 million while customer deposits were up 16.16 per cent at SAR 71,157.48 million.

Profit per share for H1 2014 was SAR 1.88. The comparable figure has been recalculated for H1 2013 to be SAR. 1.51 which reflects the bank's capital increase from 396.9 million shares to 476.28 million shares. The increase in capital was approved by the Extraordinary General Shareholders Assembly held on 18 March 2014.

NBK Capital Research comments…

Remains an outperformer

Saudi Hollandi Bank's (SHB) net profit soars by double digits, YoY and QoQ. Net profit reached SAR 480 million in 2Q2014, up 28% YoY and 15% QoQ.

Operating income beat on non-interest income positive surprise.  Total operating income soared 17% YoY and 7% QoQ and came 9.7% higher than our forecast.

Non-interest income expands 17% YoY and 7% QoQ and came higher than our forecast. The breakdown of non-interest income is not provided in Saudi banks' preliminary earning releases. It is likely that the strong performance was driven by continued strong fee income, which had soared 28% YoY and 17% QoQ in 1Q2014 on the back of strong volumes. Investment income could have also contributed to this outperformance; investment income had already come stronger than expected in 1Q2014.

NIM in line with our forecast. Net interest income growth reached 17% YoY, 8% QoQ, and came broadly in line with our forecast. The higher QoQ net interest income was on the back of an expanding balance sheet and a marginal pickup in the NIM.

Loan growth remained very strong. Loans increased 6% QoQ in 2Q2014, resulting in an YTD increase of 14%, higher than our view for SHB in FY2014. Deposit accumulation was even higher at 8% in 2Q2014, which dropped slightly the loans-to-deposits ratio to 85% at the end of June 2014.

Another set of strong results. SHB continues to deliver stellar results, as we had expected in our last report on the bank in April 2014. While, we had forecasted very good results for SHB in 2014, these, so far, have been even stronger than expected. SHB's stock price has increased 10% since our last report on SHB (April 2014), effectively closing the gap with our fair value. We maintain our "Hold" recommendation on the stock; however, we will issue an update report on SHB after we speak with the bank's management. 

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Source: CPI Financial

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