FAB Securities, a subsidiary of First Abu Dhabi Bank (FAB), has revised its price target to 83 SAR ($22.08) for Saudi Arabia’s largest lender, the Saudi National Bank (SNB), maintaining a buy rating on the stock.
The Saudi bank is expected to benefit from revenue and cost synergies after its merger with Samba Financial Group, FAB Securities said.
SNB’s net profit for the second quarter of the year nearly doubled to SAR4.58 billion primarily due to higher funded income and lower operating expenses, which have been partially offset by a decline in non-funded income.
FGB said SNB is expected to realize a cost synergy of SAR800 million and SAR1.2 billion by 2022 and 2023, respectively. The Saudi lender realized cost synergies worth SAR720 million in the first quarter of the year.
The rising interest rate regime, following Saudi SAMA’s move to hike key rates by 75bps, is also expected to benefit SNB’s net interest margins.
In addition, the loan book comprises of 52.8% retail loans and 41.7% corporate loans, allowing to reprice its assets with little or some delay, said FGB.
SNB’s CASA stood at SAR477 billion, which grew 4.81% quarter-on-quarter, contributing to 78.8% of total customer deposits in the first quarter.
The bank’s shares traded at SAR72 on Wednesday.
