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SABB -Equity Report -17-01-2012

Source: NBK Capital

12-Month Fair Value: SAR 49.00
Recommendation: Accumulate - Risk Level: 2
Last Close (15 January 2012): SAR 40.90

The Saudi British Bank (SABB) reported a net profit of SAR 655 million in 4Q2011, up 65% YoY and 4% QoQ. It looks like provisioning (not disclosed in preliminary earnings releases), decreased considerably YoY, leading to the sharp increase in net profit compared to 4Q2010. Net profit for FY2011 reached SAR 2.89 billion, 53% above FY2010 as provisioning fell significantly

We believe this is a mixed set of results. Operating income and loan growth were broadly in-line with our forecasts but the NIM was weaker than expected. The sharp drop in provisioning, and hence, the strong net profit growth reported were in-line with our view for SABB for FY2011. Our fair value for SABB stands at SAR 49.00, which is 20% above the last closing price. Hence, our current recommendation on the stock is “Accumulate.” However, we will issue an update report on SABB after we speak with the bank’s management.

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