Q1 outlook: Why top #Saudi Arabian banks could see drop in earnings | ZAWYA MENA Edition

Q1 outlook: Why top Saudi Arabian banks could see drop in earnings | ZAWYA MENA Edition:

First quarter financial earnings for Saudi Arabian banks, which are already under pressure from declining interest margins and higher cost of risk, are expected to be squeezed by the double whammy of the coronavirus-related lockdowns and steep drop in oil prices.

“We expect earnings decline of 14 percent (median for our coverage) as we expect lower net interest income and lower fee income and increased credit costs relative to last year” Shabbir Malik, banking analyst at EFG Hermes, told Zawya.

Net interest margin (NIM), the difference between a bank’s income from loans and mortgages and what it pays out on liabilities is a key component of Saudi banks’ profitability. Al Rajhi Capital expects NIM to decline by 30bps in 2020.

According to Riyad Capital outlook, on a year-on-year basis net income will be affected by lower fee-based income, exchange income and relatively higher provisions, given recent market conditions.