Alinma Bank
Alinma Banking Sector ALINMA AB - 1150.SE October 17, 2017
Alinma Bank
Q3 2017
Recommendation
Overweight
Fair Value (SAR)
19.95
Price as of October 16, 2017
18.04
Expected Return
10.59%
Tadawul Symbol 52 Week High (SAR)
1150.SE 18.46
YTD Change
19.87%
Market Cap. (SAR Million)
27,060
Company Data
52 Week Low (SAR)
On a positive note, operating income rose 28.2% YoY and 5.6% QoQ. This was mainly attributed to the increase in net special commission income by 27.5% YoY, supported by significant loans growth of 12.3% over the same-period of the previous year. Furthermore, non-interest income also grew 31.9%, which was equally supported by fees and commission income, exchange income, beside higher gains from equity investments.
11.45
3-Month Average Volume (Thousand Shares)
26,547
Market Cap. (USD Million)
7,216
Outstanding Shares (Million Shares)
1,500
Major Shareholders ( > 5% ) Public Pension Agency
10.7%
General Organization for Social Insurance
5.1%
Public Investment Fund of Saudi Arabia
In contrast, operating expenses stabilized at the same level of the previous and corresponding quarters, in spite of the increase in impairment charge for financing, staff salaries, and general and administrative expenses.
10.0%
On the other side, customer deposits surged 12.8% over the same-quarter last year, outperforming the forecasted growth rate of the banking sector deposits, as we expect the sector deposits to grow 2.8% in Q3 2017.
52-week Stock Price Movement Alin ma
Alinma Bank reported better-than-anticipated results, disclosing net profit of SAR 542 million in Q3 2017, skyrocketing 73.7% YoY and 11.1% QoQ. The bottom-line beat our estimate and analysts’ consensus of SAR 515 million and SAR 480 million, respectively. Accordingly, the nine-month bottom-line hit SAR1,451 million, surging 30.5% YoY. The strong growth came on the heels of considerable improvement in all major banking activities.
Tad awu l in dex
Likewise, the bank increased its loans portfolio significantly by 12.3% YoY. According to our analysis, corporate loans represented about 81.5% of total loans. The loans-to -deposits ratio came in at 89.2%; close to the same level of the comparable quarter last year. Meanwhile, the coverage ratio exceeded 160%, as non-performing loans (NPIs) represent only 0.9% of total loans, however, the NPIs still below the banking sector average rate of 1.3%.
160 150 140 130 120 110 100 90
Source: Tadawul
Quarterly Operating Income (SAR mn) and Profit Margin Operating Income 1,200
Profit M argin 60%
1,000
In general, we believe that Alinma Bank has benefited from the positive environment of interest rates as well as the economic changes, especially after reinstating allowances, financial benefits, and bonuses for all state employees retroactively. We expect that the bank will continue to post robust results during the FY 2017, driven by growth in revenues across all business segments. This will be underpinned by expansions in branches network, electronic channels, and customer base of the bank. Accordingly, we upgraded our valuation from SAR 17.30 to SAR 19.95 per share with assigning an “overweight” recommendation.
50%
800
40%
600 30%
400
20%
200
0
10%
Source: Company Filings, Albilad Capital Research Estimates
For more information, please contact: Turki Fadaak Research & Advisory Manager [email protected]
Abdulrahman S. Aljarboua, MSF Financial Analyst [email protected]
FY - Ending December
2015A
2016A
2017E
2018F
Net Interest Margin
3.59%
3.34%
3.61%
3.68%
Return on Assets
1.73%
1.55%
1.83%
1.88%
Return on Equity
8.10%
8.01%
10.21%
10.97%
Net Special Commission Growth
9.82%
11.96%
33.48%
13.61%
Expenses to Income
41.60%
45.07%
41.30%
40.80%
Net Loans / Deposits
86.77%
87.22%
90.14%
90.75%
NPL / Total Loans
0.74%
0.77%
0.85%
0.94%
175.05%
173.30%
176.69%
180.16%
PE
18.41
18.01
13.35
11.67
P / BV
1.47
1.41
1.32
1.24
EPS (SAR)
0.98
1.00
1.35
1.55
Coverage Ratio
Source: Company Filings, Albilad Capital Research Estimates
1
Alinma Banking Sector October 17, 2017
ALINMA AB - 1150.SE Summary of Q3 Results Income Statement (SAR mn)
Q3 2016
Q3 2017
Change
Q2 2017
Change
Special Commission Income
916
1,062
15.94%
1,021
4.00%
Special Commission Expense
228
185
(18.86%)
138
34.06%
Net Special Commission Income
688
877
27.47%
834
5.16%
Other Incomes
141
186
31.91%
173
7.51%
Total Operating Income
829
1,063
28.23%
1,007
5.56%
Total Operating Expenses
517
521
0.77%
519
0.39%
Net Income
312
542
73.72%
488
11.07%
EPS (SAR)
0.21
0.36
Balance Sheet (SAR mn)
Q3 2016
0.33
Q3 2017
Change
Q2 2017
Change
Investments
6,326
13,293
%110.13
7,265
%82.98
Loans and advances, net
69,275
77,812
%12.32
76,961
%1.11
Total Assets
102,937
111,373
%8.20
111,376
%0.00
Customer Deposits
77,319
87,229
%12.82
85,783
%1.69
Loans / Deposits
%89.60
%89.20
%89.72
Summary of Financial Statements & Forecasts Income Statement (SAR mn)
2014A 2,286
2015A
2016A 3,385
2017E
4,189
2018F
Special Commission Income Special Commission Expense
211
268
834
783
943
Net Special Commission Income
2,075
2,279
2,551
3,406
3,869
Fees & Commission Income, net
396
620
615
649
710
Foreign Exchange Income, net
57
94
121
136
159
Other Income
92
70
41
46
58
Total Operating Income
2,620
3,063
3,328
4,237
4,796
Salaries & Employee-related Expense
637
670
755
873
988
Rent & Premises-related Expense
286
316
436
517
585
Other expenses
271
300
322
360
384
Total Operating Expenses
1,194
1,285
1,513
1,750
1,957
Impairment Charge for Credit Losses & Other Assets
162
308
313
476
537
Net Income
1,264
1,470
1,502
2,011
2,302
Balance Sheet (SAR mn)
2014A
2015A
2016A
2017E
2018F
Cash & Balances with SAMA & Other Fin. Institutions
16,384
22,225
24,747
18,744
21,208
Investments, net
8,036
6,473
6,157
13,546
12,192
Loans & Advances, net
53,637
57,006
70,312
80,785
92,805
Property & Equipment, net
1,544
1,629
1,738
1,680
1,748
Other Assets
1,261
1,391
1,775
1,642
1,716
Total Assets
80,862
88,724
104,729
116,398
129,668
Due to Banks & Other Financial Institutions
33
2,264
2,432
3,088
2,780
Customer Deposits
59,428
65,695
80,612
89,620
102,261
Other Liabilities
3,462
2,413
2,507
3,184
2,866
Total Liabilities
62,923
70,372
85,551
95,892
107,907
Total Equity
17,939
18,352
19,178
20,506
21,762
Total Liabilities & Shareholders' Equity
80,862
88,724
104,729
116,398
129,668
2,547
4,812
Source: Company Filings, Albilad Capital Research Estimates
A: Actual. E: Albilad Capital Research Estimates. F: Albilad Capital Research Forecasts.
2
Alinma Banking Sector October 17, 2017
ALINMA AB - 1150.SE
Albilad Capital Rating Methodology Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts. Moreover, the evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair value that we set and the possibility of ascent/descent. Overweight:
The Target share price exceeds the current share price by ≥ 10%.
Neutral:
The Target share price is either more or less than the current share price by < 10%.
Underweight:
The Target share price is less than the current share price by ≥ 10%.
To be Revised:
No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials , waiting for more data to be updated, major change in company`s performance, change in market conditions or any other reason from Albilad Capital Research.
Albilad Capital Client Services E-mail: Tel:
[email protected] +966-11-203-9888
Toll-free: 800-116-0001
Research & Advisory
E-mail: [email protected] Tel: +966-11-290-6250 Website: www.albilad-capital.com
Asset Management
Brokerage
Custody
Investment Banking
E-mail: Tel:
E-mail: Tel:
[email protected] +966-11-290-6280
[email protected] +966-11-290-6259
E-mail: Tel:
E-mail: Tel:
[email protected] +966-11-290-6230
[email protected] +966-11-290-6256
Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital, its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report.
CMA Authorization Number 08100-37
3
Alinma Bank
Q3 2017
Recommendation
Overweight
Fair Value (SAR)
19.95
Price as of October 16, 2017
18.04
Expected Return
10.59%
Tadawul Symbol 52 Week High (SAR)
1150.SE 18.46
YTD Change
19.87%
Market Cap. (SAR Million)
27,060
Company Data
52 Week Low (SAR)
On a positive note, operating income rose 28.2% YoY and 5.6% QoQ. This was mainly attributed to the increase in net special commission income by 27.5% YoY, supported by significant loans growth of 12.3% over the same-period of the previous year. Furthermore, non-interest income also grew 31.9%, which was equally supported by fees and commission income, exchange income, beside higher gains from equity investments.
11.45
3-Month Average Volume (Thousand Shares)
26,547
Market Cap. (USD Million)
7,216
Outstanding Shares (Million Shares)
1,500
Major Shareholders ( > 5% ) Public Pension Agency
10.7%
General Organization for Social Insurance
5.1%
Public Investment Fund of Saudi Arabia
In contrast, operating expenses stabilized at the same level of the previous and corresponding quarters, in spite of the increase in impairment charge for financing, staff salaries, and general and administrative expenses.
10.0%
On the other side, customer deposits surged 12.8% over the same-quarter last year, outperforming the forecasted growth rate of the banking sector deposits, as we expect the sector deposits to grow 2.8% in Q3 2017.
52-week Stock Price Movement Alin ma
Alinma Bank reported better-than-anticipated results, disclosing net profit of SAR 542 million in Q3 2017, skyrocketing 73.7% YoY and 11.1% QoQ. The bottom-line beat our estimate and analysts’ consensus of SAR 515 million and SAR 480 million, respectively. Accordingly, the nine-month bottom-line hit SAR1,451 million, surging 30.5% YoY. The strong growth came on the heels of considerable improvement in all major banking activities.
Tad awu l in dex
Likewise, the bank increased its loans portfolio significantly by 12.3% YoY. According to our analysis, corporate loans represented about 81.5% of total loans. The loans-to -deposits ratio came in at 89.2%; close to the same level of the comparable quarter last year. Meanwhile, the coverage ratio exceeded 160%, as non-performing loans (NPIs) represent only 0.9% of total loans, however, the NPIs still below the banking sector average rate of 1.3%.
160 150 140 130 120 110 100 90
Source: Tadawul
Quarterly Operating Income (SAR mn) and Profit Margin Operating Income 1,200
Profit M argin 60%
1,000
In general, we believe that Alinma Bank has benefited from the positive environment of interest rates as well as the economic changes, especially after reinstating allowances, financial benefits, and bonuses for all state employees retroactively. We expect that the bank will continue to post robust results during the FY 2017, driven by growth in revenues across all business segments. This will be underpinned by expansions in branches network, electronic channels, and customer base of the bank. Accordingly, we upgraded our valuation from SAR 17.30 to SAR 19.95 per share with assigning an “overweight” recommendation.
50%
800
40%
600 30%
400
20%
200
0
10%
Source: Company Filings, Albilad Capital Research Estimates
For more information, please contact: Turki Fadaak Research & Advisory Manager [email protected]
Abdulrahman S. Aljarboua, MSF Financial Analyst [email protected]
FY - Ending December
2015A
2016A
2017E
2018F
Net Interest Margin
3.59%
3.34%
3.61%
3.68%
Return on Assets
1.73%
1.55%
1.83%
1.88%
Return on Equity
8.10%
8.01%
10.21%
10.97%
Net Special Commission Growth
9.82%
11.96%
33.48%
13.61%
Expenses to Income
41.60%
45.07%
41.30%
40.80%
Net Loans / Deposits
86.77%
87.22%
90.14%
90.75%
NPL / Total Loans
0.74%
0.77%
0.85%
0.94%
175.05%
173.30%
176.69%
180.16%
PE
18.41
18.01
13.35
11.67
P / BV
1.47
1.41
1.32
1.24
EPS (SAR)
0.98
1.00
1.35
1.55
Coverage Ratio
Source: Company Filings, Albilad Capital Research Estimates
1
Alinma Banking Sector October 17, 2017
ALINMA AB - 1150.SE Summary of Q3 Results Income Statement (SAR mn)
Q3 2016
Q3 2017
Change
Q2 2017
Change
Special Commission Income
916
1,062
15.94%
1,021
4.00%
Special Commission Expense
228
185
(18.86%)
138
34.06%
Net Special Commission Income
688
877
27.47%
834
5.16%
Other Incomes
141
186
31.91%
173
7.51%
Total Operating Income
829
1,063
28.23%
1,007
5.56%
Total Operating Expenses
517
521
0.77%
519
0.39%
Net Income
312
542
73.72%
488
11.07%
EPS (SAR)
0.21
0.36
Balance Sheet (SAR mn)
Q3 2016
0.33
Q3 2017
Change
Q2 2017
Change
Investments
6,326
13,293
%110.13
7,265
%82.98
Loans and advances, net
69,275
77,812
%12.32
76,961
%1.11
Total Assets
102,937
111,373
%8.20
111,376
%0.00
Customer Deposits
77,319
87,229
%12.82
85,783
%1.69
Loans / Deposits
%89.60
%89.20
%89.72
Summary of Financial Statements & Forecasts Income Statement (SAR mn)
2014A 2,286
2015A
2016A 3,385
2017E
4,189
2018F
Special Commission Income Special Commission Expense
211
268
834
783
943
Net Special Commission Income
2,075
2,279
2,551
3,406
3,869
Fees & Commission Income, net
396
620
615
649
710
Foreign Exchange Income, net
57
94
121
136
159
Other Income
92
70
41
46
58
Total Operating Income
2,620
3,063
3,328
4,237
4,796
Salaries & Employee-related Expense
637
670
755
873
988
Rent & Premises-related Expense
286
316
436
517
585
Other expenses
271
300
322
360
384
Total Operating Expenses
1,194
1,285
1,513
1,750
1,957
Impairment Charge for Credit Losses & Other Assets
162
308
313
476
537
Net Income
1,264
1,470
1,502
2,011
2,302
Balance Sheet (SAR mn)
2014A
2015A
2016A
2017E
2018F
Cash & Balances with SAMA & Other Fin. Institutions
16,384
22,225
24,747
18,744
21,208
Investments, net
8,036
6,473
6,157
13,546
12,192
Loans & Advances, net
53,637
57,006
70,312
80,785
92,805
Property & Equipment, net
1,544
1,629
1,738
1,680
1,748
Other Assets
1,261
1,391
1,775
1,642
1,716
Total Assets
80,862
88,724
104,729
116,398
129,668
Due to Banks & Other Financial Institutions
33
2,264
2,432
3,088
2,780
Customer Deposits
59,428
65,695
80,612
89,620
102,261
Other Liabilities
3,462
2,413
2,507
3,184
2,866
Total Liabilities
62,923
70,372
85,551
95,892
107,907
Total Equity
17,939
18,352
19,178
20,506
21,762
Total Liabilities & Shareholders' Equity
80,862
88,724
104,729
116,398
129,668
2,547
4,812
Source: Company Filings, Albilad Capital Research Estimates
A: Actual. E: Albilad Capital Research Estimates. F: Albilad Capital Research Forecasts.
2
Alinma Banking Sector October 17, 2017
ALINMA AB - 1150.SE
Albilad Capital Rating Methodology Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts. Moreover, the evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair value that we set and the possibility of ascent/descent. Overweight:
The Target share price exceeds the current share price by ≥ 10%.
Neutral:
The Target share price is either more or less than the current share price by < 10%.
Underweight:
The Target share price is less than the current share price by ≥ 10%.
To be Revised:
No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials , waiting for more data to be updated, major change in company`s performance, change in market conditions or any other reason from Albilad Capital Research.
Albilad Capital Client Services E-mail: Tel:
[email protected] +966-11-203-9888
Toll-free: 800-116-0001
Research & Advisory
E-mail: [email protected] Tel: +966-11-290-6250 Website: www.albilad-capital.com
Asset Management
Brokerage
Custody
Investment Banking
E-mail: Tel:
E-mail: Tel:
[email protected] +966-11-290-6280
[email protected] +966-11-290-6259
E-mail: Tel:
E-mail: Tel:
[email protected] +966-11-290-6230
[email protected] +966-11-290-6256
Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital, its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report.
CMA Authorization Number 08100-37
3
