Bank Al-Jazira’s Profits, less than Expectations -Al-Ahly Capital Announced

As much as SR229 million profits, which Bank Al-Jazira achieved in the 4th quarter of the year 2021, an increase of 146.2% on an annual basis (+11.9% on a quarterly basis), Al-Ahly Capital announced.

However, it added, that such profits were less than its expectations and the average expectations of expert firms, too, indicating that recording as high as SR325 million and SR287 million, respectively, due to the deviation of the results from expectations in the 1st place to the high cost of funds and the increase in operating expenses (excluding provisions).

The bank’s loan portfolio rose 15.7% y/y (+6.8% q/q) and was above expectations, while its cost of risk came in at 1.0% (in line with expectations.)

On the other hand, “Al-Ahly Capital” maintained its “Neutral” recommendation for Bank Al-Jazira’s share, with a target price of SR20.8 per share, noting that the stock is trading at a book value multiple of SR1.4 times, compared to a 5-year average of 0.9 times, with declining impairment costs and loan growth likely to be the main positive factor.

Revenues decreased by 2.4% on an annual basis in the 4th quarter of 2021 (+1.9% on a quarterly basis) to reach SR895 million, and it was lower than its estimates of SR963 million, adding that fees and other revenues decreased by 23.2% over annual basis (+7.1% on a quarterly basis) to hit SR219 million, but that was in line with estimates, according to “Al-Ahly Capital”.

Operating expenses (excluding provisions) increased by 16.7% on an annual basis (+7.5% on a quarterly basis) to SR468 million, which was higher than expectations of SR435 million.

As a result, the cost-to-income ratio increased to 52.3% in Q4 2021 compared to 43.8% in Q4 2020 and was well above the estimate of 45.2%.

On the other hand, provisioning expenses decreased significantly by 85.9% on an annual basis (-2.0% on a quarterly basis) to SR155 million and were in line with estimates of SR151 million, and the cost of risk decreased by 716 basis points on an annual basis to 1.0%, and that was in line with the estimates.

It added that loans increased by 15.7% on an annual basis (+6.8% on a quarterly basis) to SR62 billion and was higher than the estimates of SR59 billion, which is positive, while deposits recorded a growth of 15.2% on an annual basis (+5.5% on an quarterly basis) to SR78 billion, higher than estimates of SR75 billion.

The loan-to-deposit ratio remained stable at 79.7% in Q4 2021 versus 79.3% in Q4 2020, slightly higher than the estimate of 79.1%, Al-Ahli Capital concluded.