Samba Financial: Ending 2009 Smoothly

Samba Financial Group (SAMBA AB) posted their FY 2009 results with a marginal increase of 2.4% in their net income and EPS from the previous year. Q4 wasn’t a big contributor to the full year earnings as it added only added SAR826 million (down 31% QoQ and up 1.1% YoY) to the overall figure of SAR4,4454 million in profits. This translates into an EPS of SAR 0.928 for Q4 and SAR 5.067 for the year.

Profits were mainly driven by an increase in their core banking performance and their non-interest income; lifting their operating income by 1.4% YoY to SAR7,110 million. Although Samba recorded lower-than-expected provisions of SAR230 million, they are being more risk averse in other areas such as decreasing their loan book. This brought-down the Loan/Deposit ratio from 73% in Q4 ’08 to 57% in Q4 ’09, thus, capping any big jump in their net interest margin or net income.

Overall, Samba’s results were decent and better than the two banks that announced the same day: Banque Saudi Fransi which recorded a decline of 43% in their net income and Saudi Hollandi Bank which reported a loss of SAR440 million. Samba trades at SAR 54 and a reasonable 2010 P/E of 10 times earnings, but a hefty P/B of 1.93. The stock traded up 8.64% in the week leading to the earnings announcement, but went down -1.82% the day after earnings were announced. Bank of America maintained their “Buy” recommendation and target price of SAR 70/share. Deutsche Bank upgraded the stock from “Hold” to “Buy” and upped their target price from SAR 59 to SAR 65.