Saudi lenders boosted the main index in Riyadh to the biggest gain in the Middle East amid bets that a recovery in the kingdom’s economy will help earnings next year.
The Tadawul Banks Index, composed of 12 banking shares, advanced 0.7% on Sunday to end at the highest level since Feb. 23. Al Rajhi Bank, Bank AlBilad, Samba Financial Group and Saudi British Bank climbed between 0.7% and 2.1%, versus a 0.8% increase for the Tadawul All Share Index.
A “fast-recovery scenario” suggests 11% earnings upside for Saudi banks in 2020-21, according to Edmond Christou, an analyst at Bloomberg Intelligence. “A stronger economy could support a recovery in Saudi bank earnings, we believe, with consensus for both 2020-21 subject to 11% upward revisions on lower cost-of-risk provisioning and better revenue,” he wrote in a note.
Saudi Arabia’s income from oil is expected to drop by nearly a third to 410 billion riyals ($109.3 billion) this year as the fall in crude prices takes a toll on the kingdom, Crown Prince Mohammed bin Salman said in a statement last week. Still, non-oil revenue is expected to rise 14% to 360 billion riyals, he said, with domestically unpopular tax and fee hikes helping to lessen the blow to the budget.
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