Research company: Saudi banking sector performed well in Q4 2019

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Riyadh – Mubasher: A report issued by Al-Jazirah Capital Company said that the Saudi banking sector maintained good performance in the fourth quarter of 2019, indicating the stability of deposits and loans growth..

And the research company, in its report issued today, Wednesday, continued that mortgage loans achieved good growth as a result of the rise in contracts in the fourth quarter of 2019 over the same quarter of the previous year by 248%.

And Al-Jazira Capital Research evaluated the target price for both Al-Rajhi Bank and Al-Bilad Bank, noting that both Al-Bilad Bank and Al-Inma Bank continued to achieve double-digit growth, and Al-Rajhi Bank’s growth stabilized, while the rise in credit allocations negatively affected the profitability of most banks.

The research company set the target price for Al-Rajhi Bank at 62 riyals with its recommendation to neutralize the stock, and suggested that changes in the mortgage law would be in favor of “Al-Rajhi Bank” given its extensive individual customer base..

And I expected that the Saudi Arabian Monetary Agency’s reduction of interest rates will affect the total revenue and the net profit of the bank, and also expected that the earnings per share would reach 3.88 riyals in 2020, due to the decrease in interest rates..

The research company also set the bank’s target price at 23.9 riyals with a neutral recommendation, likely to continue to increase the cost of financing with the bank while seeking to increase murabaha deposits, and net income in 2019 more than doubled to 1.24 billion riyals, as a result of the Zakat settlement during the fourth quarter of 2018 And the net profit for the investment and financial assets increased by 25.5% over the previous year%.

It also set the target price for “Alinma Bank” at 25.6 riyals with a recommendation to increase positions, and also expected that the rate of deposits for the development bank would grow slightly less in fiscal year 2020 due to changing business conditions, where net profit in fiscal year 2019 decreased by 11.3% due to Reverse Zakat provisions amounting to 556 million riyals in 2018 and the increase in provisions for credit losses, which are expected to decrease during the coming period.

The research note clarified that the lowering of the interest rate affected the banks that deal with individuals, although it was a little late, as individuals loans provide a fixed interest rate with higher margins..

Al-Jazira Capital suggested that the effect of reducing the interest rate on the banks dealing with individuals after some time.

She pointed out that the significant growth in mortgage loans will attract the attention of all banks dealing with individuals.

The research note pointed out that the Saudi Arabian Monetary Agency reduced the second time in March 2020 to interest rates by 50 basis points for each of them (so that the rate of opposite repurchase agreements fell to the lowest level since December 2016, aimed at protecting the financial situation of the Kingdom of Saudi Arabia from the effects of the crisis Global caused by the outbreak of corona virus.

The report continued that the interest rate reduction affected the banks that deal with individuals, although it was a little late, as individual loans provide a fixed interest rate with higher margins. Therefore, the impact of lowering the interest rate on banks that deal with individuals will remain after some time has passed.

The report pointed out that the great growth in mortgage loans will attract the attention of all banks dealing with individuals.

She continued: Banks that deal with individuals focus on increasing the mortgage portfolio and the duration of the loan portfolio. With the lowering of the interest rate, lending will now be done at lower interest rates, expecting Al-Rajhi Bank to be affected further, as there is not much room in reducing the cost of financing..

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