QNBFS maintains 'market perform' rating on al khaliji.
Satyendra Pathak Doha Qatar National Bank Financial Services (QNBFS) on Wednesday announced that it maintains 'market perform' rating on Al Khalij Commercial Bank (al khaliji) as the bank posted net income of QR175.8 million in the second quarter of 2019, in line with its estimate of QR173.8 million. The bottom-line was up 6 percent y-o-y due to a significant decline of 22 percent in provisions, the report said adding the bank's liquidity remained strong with loan-to-deposit ratio (LDR) at 94 percent. The bank's revenue inched up by 0.6 percent, while opex receded by 1.8 percent, it said. Given the current operating environment, the report said, it was of the view that growth in 2019's bottom-line would be driven by an improvement in CoR. "Opex containment persisted and an uptick in revenue led to decline in cost-to-income (C/I) ratio. The bank generated positive jaws in the second quarter of 2019. Moreover, C/I ratio moved down to 27.6 percent against 28.2 percent in the second quarter of 2018 and 26.8 percent in the first quarter of 2019. We do note the current efficiency ratio is acceptable and still in-line with management's target of less than 30 percent," the report said. Margins further improved as the bank continued on shedding expensive deposits, the report said adding net loans declined as management continued to shed non-core low yielding assets, targeting more lucrative deals. Net loans contracted by 5.6 percent (q-o-q) to QR29.1 billion, while deposits dropped by 4.9 percent to QR25.7 billion. The drop in deposits sequentially was mainly attributed to the corporate and public sector segments. Nevertheless, the report said, al khaliji's liquidity position remained strong. "Asset quality remains a non-issue for now. The bank's NPLs dropped by 9.5 percent on the quarterly basis. As such, the NPL ratio dropped to 1.84 percent against 1.93 percent in the first quarter of 2019," it said. On the other hand, the report said, the coverage ratio remained flattish at 80 percent against 83 percent in 2018. "We expect the coverage ratio to be adequately maintained as management exercises prudent risk control. We also expect capitalisation to remain robust in 2019 and the coming years. We adjust our target price from QR1.5 to QR1.4 but maintain our market perform rating. We continue to think the name is in search of a catalyst to move the stock upward," the report said.
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