Saudi bank lending is expected to sustain expansion amid growth in consumer and corporate credit. NBK Capital said in a note Monday that it sees a 13 percent growth in loans in 2012 and 2013. “While a material improvement in Saudi banks' net interest margins (NIM) is very much tied to an increase in interest rates, which is not expected for now, the banks are set to benefit immensely from the surge in trading on the Saudi Stock Exchange (Tadawul),” NBK analysts wrote in the note. The brokerage said the Tadawul is likely to open up to direct foreign investors in 2012, and sees this as a “major step in the right direction.” It also said the Saudi banking index has significantly outperformed other banking indices in the region, and although the rally has closed the gap between the stock prices and the brokerage's fair values for some banks, other bank stocks still offer some limited value. NBK upgraded Saudi Hollandi Bank, partly owned by the Royal Bank of Scotland, to “accumulate” from “hold” on higher earnings outlook. In January the bank posted a higher fourth-quarter net profit due to a fall in operating expenses. The brokerage downgraded the stocks of Arab National Bank, Samba Financial Group and Saudi British Bank citing a substantial surge in their stock prices. However, the brokerage expects asset quality indicators to continue improving and boost net profit for banks. “All in all, we forecast all banks to increase their net profit in 2012, with growth rates ranging from 5 percent for Riyad Bank to 15 percent for Saudi Hollandi Bank.” NBK raised its fair value for Saudi Hollandi Bank, Banque Saudi Fransi, Arab National Bank, Samba Financial and Saudi British Bank and cut its fair value for Riyad Bank.
