Al Rajhi
Banking and Financial Services Sector
RJHI AB - 1120.SE
January 23, 2017
Al Rajhi Bank
Q4 2016
Recommendation
Neutral
Fair Value (SAR)
95.95
Price as of January 23, 2017
63.46
Expected Return
-6.6%
Company Data
Tadawul Symbol
52 Week High (SAR)
1120.SE
65.00
52 Week Low (SAR)
46.60
YTD Change
2.6%
3-Month Average Volume (Thousand Shares)
2,457
Market Cap. (SAR Million)
104,585
Market Cap. (USD Million)
27,889
Outstanding Shares (Million Shares)
1,625
Major Shareholders ( > 5% )
Sulaiman Abdulaziz Al Rajhi Endowment
%14.79
General Organization for Social Insurance
%10.19
52-week Stock Price Movement
Alrajhi
140
130
120
110
100
90
Source: Tadawul
Quarterly Operating Income (SAR mn) and Profit Margin
Profit M argin
5000
60%
4000
50%
3000
40%
2000
30%
1000
20%
0
10%
Source: Company Filings, Albilad Capital Research Estimates
Turki Fadaak
Research & Advisory Manager
[email protected]
The increase in profits in 4Q 2016 was mainly driven by an increase in operating
income by 6.1% YoY, as a result of an increase in the net financing and investment income, coupled with an increase in other operating income. Meanwhile,
the growth in profit for the full-year was mainly driven by an increase in operating income by 11.2% on the back of an increase in net financing and investment
income, fees income from banking services and other operating income.
Net special commission income jumped 17.5% YoY to record SAR 2,921 million
in Q4, while on an annual level culminated at SAR 11,165 million, up 12.1%
from 2015, due to an increase in total special commission income by 20% in Q4
2016 and 14.6% for FY 2016 as a result of an increase in interest rates on the
US dollar, which reflected locally on the high rate of reverse repo agreements
during the period.
During the FY2016, loans increased by 7% YoY, reaching SAR 224.9 billion.
Investments, however, tumbled by 14.7%, to record SAR 34.03 billion, which
led to an increase in total assets by 7.6% to SAR 339.7 billion. Moreover, customer deposits rose 5.7% YoY to SAR 272.6 billion. Loans increased at a faster
pace than deposits growth, as a result, the loans-to-deposits ratio increased to
83.3% in Q4 2016 from 82% in 2015. In addition, low-cost demand deposits
accounted for 92% of total deposits.
Tadawul Index
150
Operating Income
Alrajhi Bank reported net profit of SAR 2,047 million in Q4 2016, surging by 5%
QoQ and 1.9% YoY, but fell short below our expectation of SAR 2,086 million
by 1.9%. On an annual level, the bank reported net profit of SAR 8,126 million,
up 12%.
Despite the forecast slowdown for local economy, we are optimistic that credit
growth will continue driven by fundamental factors, particularly the retail banking sector. This is supported by improved liquidity conditions in line with the improvement in the profit margin for the bank as well as positive environment for
global interest rates.
By reviewing the future performance of Alrajhi Bank, thus, our fair value is SAR
59.5 per share and assigning a “Neutral” recommendation.
FY - Ending December
5503A
5509A
5506A
5506F
Total Assets (SAR million)
307,712
315,620
339,712
362,658
Total Deposit (SAR million)
256,077
257,822
272,593
288,949
Net Loans (SAR million)
205,940
210,218
224,994
240,415
Investment (SAR million)
42,550
39,877
34,033
47,136
Net Interest Margin
3.87%
3.67%
4.01%
4.11%
Net Loans/Deposits
80%
82%
83%
83%
Coverage Ratio
196%
197%
195%
199%
NPL / Total Loans
1.2%
1.2%
1.2%
1.2%
PE
12.24
11.73
10.29
9.75
Dividend Yield
3.4%
2.9%
2.9%
3.4%
P / BV
2.00
1.79
1.58
1.42
Net Special Commission Growth
1.7%
1.4%
12.1%
6.5%
Source: Company Filings, Albilad Capital Research Estimates
1
Al Rajhi
Banking and Financial Services Sector
January 23, 2017
Income Statement (SAR mn)
RJHI AB - 1120.SE
2013A
2014A
2015A
2016A
2017F
Special commission income
051009
051504
051591
001633
051955
Special commission expense
366
459
555
965
651
Net special commission income
946,9
948,9
949,9
,,4,6,
,,4891
Fees and commission income, net
51546
51641
51653
51565
41095
Foreign exchange income, net
599
595
515
540
535
Other
453
095
054
506
506
Operating income
,448,,
,44669
,449,6
,,418,
,64168
Salaries and employee-related expenses
51450
51903
51660
51545
41565
546
596
533
569
559
Rent and premises-related expenses
Depreciation
359
304
463
354
340
Other general and administrative expenses
01006
01449
01465
01455
01449
Total Operating Expenses
94988
94,,8
94688
,644,,
,,4668
Impairment charge for credit losses, net
51495
51405
01591
51505
51355
Net Income
94,48
64846
94,46
84,16
84,98
2013A
2014A
2015A
2016A
2017F
Cash & balances with SAMA & other financial institutions
391344
951055
941569
661565
601535
Investments
451964
351995
451166
431544
361046
Loans and advances, net
Balance Sheet (SAR mn)
0161104
5591535
5051501
5531553
5351309
Property and equipment, net
31455
31103
91965
61046
61651
Other Assets
41640
31456
91510
61965
61546
Total Assets
199489,
46949,1
4,,4616
44949,1
46146,8
Due to banks & other financial institutions
Customer deposits
Other liabilities
Total Liabilities
41635
51049
31991
31515
41590
5401915
5961566
5961155
5651954
5111535
61546
61654
61650
051541
051695
1,,4,66
16,48,,
168498,
1864916
46446,6
Total equity
411359
301156
361645
951655
951551
Total Liabilities & Shareholders' Equity
199489,
46949,1
4,,4616
44949,1
46146,8
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
January 23, 2017
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
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 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.
CMA Authorization Number 08100-37
3