Arab National Bank punished for results

What's Down: Disappointed investors sold shares in Arab National Bank yesterday after first quarter profits at the Saudi-based lender failed to match analyst expectations.

Disappointed investors sold shares in Arab National Bank (ANB) yesterday after first-quarter profit at the lender based in Saudi Arabia failed to match analyst expectations.

ANB, established in 1979, is 40 per cent-owned by Arab Bank in Jordan. ANB is widely known as a retail bank, with market share in Saudi Arabia exceeding 10 per cent.

First-quarter net income reached 655 million Saudi riyals, an 11 per cent increase from on last year's first quarter but 2.6 per cent below an analyst's estimate. "Arab National Bank is in the middle of the pack. The results were not amazing, but not really bad either," said Farouk Miah, an analyst at NCB Capital in Riyadh. "The bank's numbers were OK compared with their historical figures, but worse compared to the sector."

Growth for ANB's loan book was "relatively low" at 12.3 per cent year-on-year, compared with an average of 16 per cent for seven other lenders that have already reported their results, Mr Miah said. Also, ANB's net interest margin was worse than its peers', Mr Miah said. ANB's margin declined 23 basis points (bps) year-on-year compared with a decline of 17 bps for the sector.

NCB Capital in March downgraded ANB to "neutral" from "overweight".

The results justified the current rating on the bank, Mr Miah said. He gives the stock a fair value of 32.90 riyals. ANB declined 2.5 per cent yesterday to 30.50 riyals. The stock has risen 12.7 per cent so far this year, underperforming the benchmark Tadawul All-Share Index, which is up 15.8 per cent.

"Bigger banks, heavyweights like Samba, Riyad Bank and Al Rajhi, which reported an 18 per cent increase in net income on Thursday, are better positioned to capture retail growth," Mr Miah said. "Riyad Bank in particular is very interesting because it hasn't been growing its loan book as aggressively, but keeping their margin high, while everyone else is chasing volumes and more loans."

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