Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alinma Bank (SAU:1150, Financial) reported a 22% increase in net income year-on-year, driven by a 14% rise in operating income.
- The bank achieved a 13% year-to-date growth in loans and total assets, indicating strong financial performance.
- Customer deposits increased by 11% year-to-date, with a notable 19% growth in CASA (Current Account Savings Account) balances.
- The bank's NPL (Non-Performing Loan) ratio remained stable at 78 basis points, with a high coverage ratio of 245%.
- Alinma Bank (SAU:1150) continues to focus on digital transformation and customer experience, aiming to be the most digitally advanced retail bank in the country.
Negative Points
- The bank's net profit margin decreased by nine basis points compared to the same period last year, standing at 3.72%.
- Operating expenses grew by 11% year-on-year, which could impact profitability if not managed effectively.
- The cost of risk remains relatively high compared to the sector, although it has been revised down to 50-60 basis points.
- The bank's guidance for net interest margin has been downgraded, indicating potential challenges in maintaining profitability.
- There is a concern about the sustainability of CASA growth and the impact of potential rate cuts on margins.
Q & A Highlights
Q: You've downgraded your guidance for margins. Can you comment on what surprised negatively versus your initial expectations? Also, as rate cuts start to come through, do you expect margins to expand from here as deposits price faster versus assets?
A: We revised our guidance to provide more clarity, indicating a range of 0 to 10 basis points. We've been focused on growing our CASA balances through customer acquisition across various segments. As rates decrease, we expect some migration back to CASA, which should help margins. However, the exact impact will depend on the rate of migration and other factors.
Q: Could you update us on your NIM sensitivity to 25 basis points lower rates? And regarding dividends, do you expect to continue paying a quarterly cash dividend of this magnitude?
A: Our NIM sensitivity is approximately 1.5 to 2 basis points for every 25 basis points change, assuming all else remains equal. Regarding dividends, we intend to continue quarterly payouts, but the payout ratio may be adjusted based on profit growth and capital needs.
Q: How are you thinking about loan growth next year for both corporate and retail, given potential interest rate cuts? Also, do you see cost of risk for 2025 potentially being at the same level or lower?
A: We expect strong growth in corporate loans due to ongoing projects in the country. Retail growth should benefit from lower interest rates improving affordability. We anticipate cost of risk to be lower due to strong economic activity and growth.
Q: Can you provide insights on the SME sector's default rates and your exposure?
A: Our SME loans constitute about 4% of our overall financing. We have not observed significant defaults in this sector, thanks to our conservative approach and tailored products, supported by government guarantees.
Q: What are your thoughts on the recent Ministry of Finance announcement regarding the Bin Laden Group's loan resolution? How does it impact the bank?
A: The resolution is positive for the economy and the banking sector, as it addresses a significant issue and supports major contractors. This move should reduce the need for provisions and positively impact cost of risk.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
