Saudi-listed banks set for profit, loans growth until 2027: CI Capital
Egypt-based CI Capital has upped its growth forecast for profit and loans for Saudi-listed banks for 2025 to 2027.
The compound annual growth rate for loans has increased to 12.8% from its earlier 10% projection for 2025-2027.
'The market's concerns on profitability pressures are exaggerated,' CI Capital said, given the slow pace of the interest rate cycle reversal compared to the rapid 2022-23 hikes.
Positives, including healthy earnings growth (+8% 2025-27 CAGR), have been overlooked by the market, the report said, favouring Saudi National Bank, Saudi Awwal Bank, Riyad Bank and Alinma Bank.
Despite a negatively skewed net interest margin (NIM) guidance, the Tadawul-listed banks guided for a positive return on equity (ROE) movement for the year, except Saudi Awwal Bank, supported by higher loan volume, fees, as well as controlled operating and provision expenses.
ROE will remain healthy despite an inevitable margin compression, the report said.
CI Capital expects NIMs to drop by an average of 21 basis points (bps) for all banks except Al Rajhi Bank and Bank Al Jazira, which will see a 23 bps decline in 2025-2027.
Moreover, the cost of risk is forecast to normalise at 50 bps on average over 2025-27 - a reflection of lower recoveries that supported the corresponding 2024 figure of 36 bps.
Saudi banks are trading at a steep 22% discount to their 2022 price-to-book peak levels, against an average 16% premium for emerging market banking stocks.
Similarly, compared to other sectors on Tadawul, Saudi banks trade at a 27% discount to their 2022 price-to-earnings peak, the report said.
(Editing by Brinda Darasha; brinda.darasha@lseg.com)
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