In its latest report on Saudi banks, NCB Capital reduces its net interest margin (NIM) estimate due to increasing competition and expects a 9 bps decline in margins from a previous estimate of flat NIMs.
“As a result, we expect Saudi banks to have a lower profit growth that is also due to reduced income from brokerage,” said Mahmood Akbar, equity research analyst at NCB Capital.
“Nonetheless, we expect a bottoming out of margin contraction in 2013 and hence expect current valuations to improve. All our ratings are unchanged; we continue to prefer large-caps’ banks such as Al-Rajhi Bank, Samba Financial Group and Riyad Bank, which trade at attractive levels and offer a high dividend yield.”
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