Al Rajhi Bank - GulfBase
Al Rajhi Banking and Financial Services Sector RJHI AB - 1120.SE
July 19, 2016
Al Rajhi Bank
Q2 2016
Recommendation
Neutral
Fair Value (SAR)
02.16
Price as of July 18, 2016
33.55
Expected Return
%5.1
Company Data
Tadawul Symbol 52 Week High (SAR)
1120.SE 66.25
52 Week Low (SAR)
44.70
YTD Change
%11.9
Market Cap. (SAR Million)
96,411
3-Month Average Volume (Thousand Shares)
1,830
Market Cap. (USD Million)
24,592
Outstanding Shares (Million Shares)
1,625
Major Shareholders ( > 5% )
Sulaiman Abdulaziz Al Rajhi Endowment
%14.79
General Organization for Social Insurance
%10.19
Banking Sector
Operating income hit SAR 3,900 million in Q2 2016 skyrocketing 10.3% YoY boosted by growth in banking fees in addition to surging net special commission income by 9.7% YoY posting SAR 2,757 million. Furthermore, Operating expenses increased by 16% in Q2 2016 due to increase in salaries and the impairment charge for financing and investment compared to the same period of last year. By the end of Q2 2016, net loans plateaued at SAR 224.5 billion surging 6.6% while investments languished at SAR 35.9 billion slumping 40.5% compared to Q2 2015. Total assets culminated at SAR 331.3 billion flat rising 1.3%. Deposits grew 0.57% to SAR 270.9 billion compared to the balance of Q2 2015. Despite the remarkable earning growth in the quarter, the bank reported a deceleration of growth in total assets in and contracting deposits. Total asset growth stabilized at 1.3% in Q2 2016 compared to 10.8% Q2 2015. Deposits on the other hand increased 0.57% by the end of Q2 2016 versus 8.6% increase in the same period of 2015. loans to deposits increased from 78% to 83% because loans growth is faster than deposits growth.
52-week Stock Price Movement Alrajhi
Alrajhi Bank revealed Q2 2016 interim results unveiling Q2 bottom line of SAR 2,052 million up 5.7% YoY in line with our estimates of SAR 2,087 million, thus the semi annual figure soared by 17.6% to SAR 4,069 million.
Tadawul Index
110 100
On the contrary, we also this quarter noticed the effect of rising interest rates on the bank’s net special commission income which hiked 9.7% YoY in Q2 2016 compared to its growth in Q2 2015 by 0.8% YoY.
90 80 70
60
Therefore, we reviewed our estimates for future revenues, loans and deposits, thus our fair value is SAR 61.20.
50
Source: Tadawul
Quarterly Operating Income (SAR mn) and Profit Margin
FY - Ending December
1623E
1620F
1622F
1622F
Total Assets (SAR million)
523,016
556,233
532,022
525,221
Total Deposit (SAR million)
130,112
103,336
122,220
132,006
Net Loans (SAR million)
126,122
116,020
153,235
136,223
Investment (SAR million)
53,222
32,235
36,232
32,321
Net Interest Margin
%5.02
%3.65
%3.21
%3.21
Net Loans/Deposits
%21
%25
%23
%23
Turki Fadaak Research & Advisory Manager [email protected]
Coverage Ratio
%232
%222
%222
%232
NPL / Total Loans
%2.1
%2.1
%2.1
%2.1
Mohammed Alghalbi Financial Analyst [email protected]
PE
26.35
3.36
2.22
2.25
Dividend Yield
%5.2
%3.1
%6.6
%6.6
P / BV
2.02
2.32
2.50
2.10
Net Special Commission Growth
%2.3
%23.3
%2.2
%2.6
Operating Income
Profit M argin
5000
60%
4000
50%
3000
40%
2000
30%
1000
20%
0
10%
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2014
2014
2015
2015
2015
2015
2016
2016
Source: Company Filings, Albilad Capital Research Estimates
Source: Company Filings, Albilad Capital Research Estimates
1
Al Rajhi Banking and Financial Services Sector July 19, 2016 Income Statement (SAR mn)
RJHI AB - 1120.SE 2014A
2015E
2016F
2017F
2018F
Special commission income
26,125
26,132
22,202
21,322
25,306
Special commission expense
533
133
522
523
363
Net special commission income
718,9
717,7
,,1,71
,11111
,,11,,
Fees and commission income, net
1,252
1,263
1,232
1,313
5,626
Foreign exchange income, net
331
326
2,632
2,603
2,221
Other
233
265
225
225
220
Operating income
,,1339
,,1933
,,1,,1
,31,18
,91,37
Salaries and employee-related expenses
1,323
1,002
1,222
1,332
5,620
132
133
132
120
133
Rent and premises-related expenses Depreciation
325
523
521
523
532
Other general and administrative expenses
2,553
2,523
2,360
2,353
2,305
Total Operating Expenses
71,38
71188
,11339
,,11,1
,11,,3
Impairment charge for credit losses, net
1,521
2,332
1,233
1,502
1,313
Net Income
318,3
91,,1
8117,
8188,
71,71
2014A
2015E
2016F
2017F
2018F
36,261
35,303
33,033
33,535
06,620
Balance Sheet (SAR mn) Cash & balances with SAMA & other financial institutions Investments
31,336
53,222
32,235
36,232
32,321
Loans and advances, net
163,336
126,122
116,020
153,235
136,223
Property and equipment, net
3,223
3,323
0,622
0,302
0,230
Other Assets
3,560
3,322
0,323
2,222
2,025
Total Assets
,1919,1
,,,1311
,,11,33
,381389
,9,1881
1,253
3,332
5,033
5,220
3,323
130,622
130,112
103,336
122,220
132,006
2,065
2,233
3,623
3,303
3,033
Total Liabilities
13,18,,
138178,
1991337
17,1,39
,,,1988
Total equity
32,230
30,053
31,333
32,523
01,633
Total Liabilities & Shareholders' Equity
,1919,1
,,,1311
,,11,33
,381389
,9,1881
Due to banks & other financial institutions Customer deposits Other liabilities
Source: Company Filings, Albilad Capital Research Estimates
Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results.
2
Al Rajhi Banking and Financial Services Sector July 19, 2016
RJHI AB - 1120.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/en/research
Brokerage E-mail: Tel:
Asset Management E-mail: Tel:
[email protected] +966-11-290-6280
[email protected] +966-11-290-6230
Investment Banking E-mail: Tel:
[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 Co., 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.
3
July 19, 2016
Al Rajhi Bank
Q2 2016
Recommendation
Neutral
Fair Value (SAR)
02.16
Price as of July 18, 2016
33.55
Expected Return
%5.1
Company Data
Tadawul Symbol 52 Week High (SAR)
1120.SE 66.25
52 Week Low (SAR)
44.70
YTD Change
%11.9
Market Cap. (SAR Million)
96,411
3-Month Average Volume (Thousand Shares)
1,830
Market Cap. (USD Million)
24,592
Outstanding Shares (Million Shares)
1,625
Major Shareholders ( > 5% )
Sulaiman Abdulaziz Al Rajhi Endowment
%14.79
General Organization for Social Insurance
%10.19
Banking Sector
Operating income hit SAR 3,900 million in Q2 2016 skyrocketing 10.3% YoY boosted by growth in banking fees in addition to surging net special commission income by 9.7% YoY posting SAR 2,757 million. Furthermore, Operating expenses increased by 16% in Q2 2016 due to increase in salaries and the impairment charge for financing and investment compared to the same period of last year. By the end of Q2 2016, net loans plateaued at SAR 224.5 billion surging 6.6% while investments languished at SAR 35.9 billion slumping 40.5% compared to Q2 2015. Total assets culminated at SAR 331.3 billion flat rising 1.3%. Deposits grew 0.57% to SAR 270.9 billion compared to the balance of Q2 2015. Despite the remarkable earning growth in the quarter, the bank reported a deceleration of growth in total assets in and contracting deposits. Total asset growth stabilized at 1.3% in Q2 2016 compared to 10.8% Q2 2015. Deposits on the other hand increased 0.57% by the end of Q2 2016 versus 8.6% increase in the same period of 2015. loans to deposits increased from 78% to 83% because loans growth is faster than deposits growth.
52-week Stock Price Movement Alrajhi
Alrajhi Bank revealed Q2 2016 interim results unveiling Q2 bottom line of SAR 2,052 million up 5.7% YoY in line with our estimates of SAR 2,087 million, thus the semi annual figure soared by 17.6% to SAR 4,069 million.
Tadawul Index
110 100
On the contrary, we also this quarter noticed the effect of rising interest rates on the bank’s net special commission income which hiked 9.7% YoY in Q2 2016 compared to its growth in Q2 2015 by 0.8% YoY.
90 80 70
60
Therefore, we reviewed our estimates for future revenues, loans and deposits, thus our fair value is SAR 61.20.
50
Source: Tadawul
Quarterly Operating Income (SAR mn) and Profit Margin
FY - Ending December
1623E
1620F
1622F
1622F
Total Assets (SAR million)
523,016
556,233
532,022
525,221
Total Deposit (SAR million)
130,112
103,336
122,220
132,006
Net Loans (SAR million)
126,122
116,020
153,235
136,223
Investment (SAR million)
53,222
32,235
36,232
32,321
Net Interest Margin
%5.02
%3.65
%3.21
%3.21
Net Loans/Deposits
%21
%25
%23
%23
Turki Fadaak Research & Advisory Manager [email protected]
Coverage Ratio
%232
%222
%222
%232
NPL / Total Loans
%2.1
%2.1
%2.1
%2.1
Mohammed Alghalbi Financial Analyst [email protected]
PE
26.35
3.36
2.22
2.25
Dividend Yield
%5.2
%3.1
%6.6
%6.6
P / BV
2.02
2.32
2.50
2.10
Net Special Commission Growth
%2.3
%23.3
%2.2
%2.6
Operating Income
Profit M argin
5000
60%
4000
50%
3000
40%
2000
30%
1000
20%
0
10%
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2014
2014
2015
2015
2015
2015
2016
2016
Source: Company Filings, Albilad Capital Research Estimates
Source: Company Filings, Albilad Capital Research Estimates
1
Al Rajhi Banking and Financial Services Sector July 19, 2016 Income Statement (SAR mn)
RJHI AB - 1120.SE 2014A
2015E
2016F
2017F
2018F
Special commission income
26,125
26,132
22,202
21,322
25,306
Special commission expense
533
133
522
523
363
Net special commission income
718,9
717,7
,,1,71
,11111
,,11,,
Fees and commission income, net
1,252
1,263
1,232
1,313
5,626
Foreign exchange income, net
331
326
2,632
2,603
2,221
Other
233
265
225
225
220
Operating income
,,1339
,,1933
,,1,,1
,31,18
,91,37
Salaries and employee-related expenses
1,323
1,002
1,222
1,332
5,620
132
133
132
120
133
Rent and premises-related expenses Depreciation
325
523
521
523
532
Other general and administrative expenses
2,553
2,523
2,360
2,353
2,305
Total Operating Expenses
71,38
71188
,11339
,,11,1
,11,,3
Impairment charge for credit losses, net
1,521
2,332
1,233
1,502
1,313
Net Income
318,3
91,,1
8117,
8188,
71,71
2014A
2015E
2016F
2017F
2018F
36,261
35,303
33,033
33,535
06,620
Balance Sheet (SAR mn) Cash & balances with SAMA & other financial institutions Investments
31,336
53,222
32,235
36,232
32,321
Loans and advances, net
163,336
126,122
116,020
153,235
136,223
Property and equipment, net
3,223
3,323
0,622
0,302
0,230
Other Assets
3,560
3,322
0,323
2,222
2,025
Total Assets
,1919,1
,,,1311
,,11,33
,381389
,9,1881
1,253
3,332
5,033
5,220
3,323
130,622
130,112
103,336
122,220
132,006
2,065
2,233
3,623
3,303
3,033
Total Liabilities
13,18,,
138178,
1991337
17,1,39
,,,1988
Total equity
32,230
30,053
31,333
32,523
01,633
Total Liabilities & Shareholders' Equity
,1919,1
,,,1311
,,11,33
,381389
,9,1881
Due to banks & other financial institutions Customer deposits Other liabilities
Source: Company Filings, Albilad Capital Research Estimates
Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results.
2
Al Rajhi Banking and Financial Services Sector July 19, 2016
RJHI AB - 1120.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/en/research
Brokerage E-mail: Tel:
Asset Management E-mail: Tel:
[email protected] +966-11-290-6280
[email protected] +966-11-290-6230
Investment Banking E-mail: Tel:
[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 Co., 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.
3
