Riyadh – Mubasher: Riyad Capital said that losses recorded by Alawwal Bank in the fourth quarter of 2016 "took the market by surprise" and came contrary to the estimates.

The bank achieved SAR 249.3 million net losses in Q4 against net profits of SAR 451 million in the year-ago period, while the research firm expected a net income of SAR 348 million and street estimates were SAR 369 million.

The research firm added that while its valuations are attractive at 0.90x 2017E P/B, it maintained its "Neutral" rating and raised the target price SAR 14 from SAR 12.

Riyad Capital noted that after raising interest rates, banks have had to offer to depositors particularly in Q3 and part of Q4. However, time deposit rates have come down since, which may have an impact in Q1-17.

"It appears that the bank has taken an approximate SAR 800 million in provisions in Q4 versus total impairments of SAR 340 million in Q3, the report added.

The research pinpointed that last quarter was an eventful one for the bank, especially after changing its corporate identity and name to Alawwal Bank and appointing a new CEO in November, which may have taken some time for the bank to reestablish its presence in the market.