Saudi banks face limited impact from potential global slowdown risks and are likely to bounce back to healthy return-on-equity levels driven by lending growth and ample liquidity, J.P. Morgan Securities said and began coverage of the Saudi banking sector.
The brokerage set an “overweight” rating on Saudi British Bank (SABB Bank) and Samba Financial Group, the country’s second-largest lender by market value.
It started coverage of Al Rajhi Bank, the kingdom’s biggest Islamic lender, and Riyad Bank, Saudi's third largest listed lender by market value, with “neutral” ratings.
Lending growth for the four largest Saudi banks by market value could average 13 percent by 2013 from the flat levels seen in fiscal 2010, JP Morgan said.
The brokerage expects lending growth to be driven by higher economic growth levels and the $125 billion government spending plan announced in the first quarter of this year.
JP Morgan named HSBC's Saudi affiliate SABB Bank its preferred pick among Saudi banks, followed by Samba.
“HSBC affiliation puts SABB in a sweet spot of benefitting from HSBC's strong EM (emerging market) expertise and network, making SABB a preferred banking partner for international corporates that aim to tap into Saudi's strong infrastructure investments pipeline,” JP Morgan said.
Under JP Morgan’s Middle East and North Africa financials coverage universe, its preferred stocks are Commercial Bank of Qatar , First Gulf Bank , SABB, Commercial International Bank , Doha Bank , Samba and Qatar National Bank .