Middle East News: HSBC Warns Against Buying Saudi Arabia's Banks - Bloomberg:
Six Saudi lenders had their stock recommendations cut to reduce from hold by HSBC Holdings Plc, which said valuations have become too expensive given the negative risks to earnings.
The downgrades for Riyad Bank, Arab National Bank, Banque Saudi Fransi, Al Rajhi Bank, National Commercial Bank and Samba Financial Group mean all seven banks covered by the broker now have the same rating, with Alinma Bank being kept at reduce.
While measures such as regulatory easing and free government deposits are temporarily helping lenders’ credit quality and margins, they are only delaying credit risk events until mid-September, analyst Aybek Islamov wrote in a note.
The sector’s current valuation “leaves no room for negative earnings surprise at a time when these are highly likely,” Islamov said. He expects combined net income for the seven banks he covers to fall 17% this year and a further 3% in 2021.
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