Saudi British Bank Reports Q2 Profits Up 15.19 Per Cent

The Saudi British Bank (SABB) reported robust financial results for the second quarter of 2014, showcasing a net profit of SAR 1,157.23 million. This figure represents a 15.19% increase compared to the same period last year and a 7.1% rise from the previous quarter. For the first half of 2014, SABB’s profits reached SAR 2,237.76 million, marking a 14.61% year-on-year increase. Earnings per share also saw an improvement, climbing from SAR 1.95 to SAR 2.24.

The bank’s total assets grew by 8.36% to SAR 175,468 million. Investments surged by 34.47%, reaching SAR 41.475 million, while loans and advances increased by 6.33% to SAR 112,710 million. Customer deposits saw a notable rise of 9.86%, totaling SAR 138,295 million.

NBK Capital MENA’s Commentary:

The latest results from SABB were strong and in line with expectations, showing no major surprises. The increase in net interest margin (NIM) reflects lower balance sheet liquidity. Specifically, SABB’s net profit for Q2 2014 was SAR 1.16 billion, a 15% increase year-on-year and a 7% rise quarter-on-quarter. This growth was driven by a double-digit increase in operating income, which reached SAR 1.66 billion—an 11% year-on-year increase and a 3% rise from the previous quarter. This growth was largely attributed to higher net interest income.

The bank’s balance sheet liquidity decreased in Q2 2014, as evidenced by the increase in loans and investments, which rose by approximately SAR 6 billion, while total assets remained relatively stable. This suggests a reduction in other low-interest-earning assets, likely balances with the Saudi Arabian Monetary Authority (SAMA). Net interest income saw a 7% year-on-year increase and a 5% quarter-on-quarter rise, aligning closely with our forecasts.

Non-interest income advanced by 16% year-on-year, slightly exceeding our expectations. However, a detailed breakdown of this income is not provided in the preliminary earnings release from Saudi banks.

Loan growth of 3% quarter-on-quarter is consistent with our projections for the full year 2014. Deposits increased marginally by 1% quarter-on-quarter, resulting in a slight rise in the loans-to-deposits ratio to 81% by the end of June 2014.

Overall, SABB’s results reflect positive trends in NIM, operating income, and loan growth. While net profit growth for the first half of 2014 (+14.5%) surpassed our full-year forecast of 10%, we maintain our fair value estimate and “Hold” recommendation on the bank. An updated report will be issued following discussions with SABB’s management.