Mubasher: The research unit at MubasherTrade said in a report issued on Saudi Arabia’s National Commercial Bank (NCB) that Q3 earnings missed its forecasts. It maintained a ‘Buy/Low Risk’ recommendation on the stock.

NCB, the kingdom's largest bank by assets, posted SAR 2 billion in net earnings for the third quarter of 2015, up 7% from SAR 1.86 billion in the same period of 2014.

The nine-month net profits grew 2% year-on-year from SAR 6.8 billion to SAR 6.9 billion.

The profit growth was driven by high operating income, the bank said in a bourse statement on Sunday. 

The bank’s Q3 earnings missed MubasherTrade estimate of SAR2.160 billion and market consensus of SAR2.143 billion by 8% and 7%, respectively.

YoY earnings growth was mainly due to higher total banking income of SAR4.313 billion (+5% YoY, +1% QoQ; -6% vs. MTRe), due to an increase in net interest income to SAR3.210 billion (+15% YoY, +2% QoQ, +8% vs. MTRe).

However, non-interest income decreased by 17% YoY (-4% QoQ), reaching SAR1.103 billion in Q3 2015, most likely due to a decrease in fees & commissions income. Total operating expenses and provisions increased by 3.3% YoY in Q3-15 to SAR2.319 billion, most likely on higher provisioning.
Net loans growth outpaces that of deposits: On a YoY basis, net loans recorded a faster growth (+11.1% YoY, +1.8% QoQ) than deposits (+5.8% YoY, +0.9% QoQ) in Q3 2015.

“We note that NCB is trading at 2016e PBV of 1.9x, representing a premium to the local peers' average of 1.3x and regional peers' average of 1.7x. We believe this premium is justified by the bank's strong fundamentals as it posts one of the highest ROEs in Saudi Arabia,” said the report issuer.

MubasherTrade also maintained its positive view on NCB's future growth outlook with its Buy/Low Risk rating and the same PT of SAR71.4/share, which represents a expected total return of +28%.