News Column

Riyad Bank Q2 profits up 17.36 per cent at SAR 1.136 billion

July 7, 2014

Riyad Bank Q2 profits also rose 5.28 per cent quarter-on-quarter from SAR 1.079 billion in Q1. H1 2014 profits rose 15.48 per cent to SAR 2.216 billion. Total profit was up 13,76 per cent at SAR 4.027 billion.

Earnings per share rose from SAR 0.64 to SAR 0.74. Earnings per share for the period ended 30 June 2013 have been restated taking into account bonus shares issued to raise capital during the current quarter for the purposes of comparison.

Total assets were up 11.67 per cent at SAR 213.992 billion. Investments rose 30.79 per cent to SAR 46.31 billion. Loans and advances were up 11.56 per cent at SAR 140.774 billion while customer deposits increased 8.26 per cent to SAR 160.1 billion.

NBK Capital MENA comments...

Good set of results; higher-than-expected non-interest income

Riyad Bank's net profit soars by 17% YoY driven by a double-digit increase in operating income. Net profit reached SAR 1.14 billion in 2Q2014, up 5% QoQ.

Operating income beat on higher-than-expected non-interest income. Total operating income increased 15% YoY and 8% QoQ and came 7.7% higher than our forecast.

Non-interest income surges 29% YoY and 19% QoQ and came higher than our forecast. The breakdown of non-interest income is not disclosed in Saudi banks' preliminary earning releases. It is very likely that the strong performance was driven by continued strong fee income, which had soared 19% YoY in 1Q2014. Undoubtedly, brokerage commissions are one reason for the outperformance in terms of non-interest income as trading on Tadawul soared 67% YoY and 40% QoQ in 2Q2014; Riyad Bank has around 6% market share on Tadawul. Investment income could have also contributed to the non-interest income outperformance; investment income had already come stronger than expected in 1Q2014.

NIM flat QoQ in line with our forecast. Net interest income increased 8% YoY, 2% QoQ, and came in line with our forecast. Provisioning (not disclosed in Saudi banks' preliminary earning releases) appears to have increased YoY and QoQ. This does not come as a surprise to us as we had forecast Riyad Bank's loan provisioning to swell by 30% YoY in FY2014.

Loan growth at 2.9% QoQ broadly in line with our forecast. Deposits were flat in 2Q2014, which increased the simple loans-to-deposits ratio to 88% by the end of June 2014.

Good set of results with the operating income beat driven by higher-than-expected non-interest income. The NIM, provisioning trends, and loan growth came in line with our view for FY2014. We maintain our "Hold" recommendation on the stock; however, we will issue an update report on Riyad Bank after we speak with the bank's management. 

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Source: CPI Financial

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