Al-Rajhi earnings rise 2.1%

BUSINESS BOOST: Al-Rajhi saw its first quarter profit rise 2.1% to $427.2 million.

Saudi Arabia's Al-Rajhi Bank's first-quarter profit rose 2.1%, as the Gulf's largest Islamic lender boosted profit from core business operations.

Net income in the three months to March 31 climbed to 1.6 billion riyals ($427.2 million), or 1.07 riyals per share, compared with 1.57 billion riyals, or 1.05 riyals per share, in the year-earlier period, the bank said in a statement.

The bank raised its paid-up capital by 11.1% earlier this year through a bonus share issue.

It was the strongest rise in quarterly net profit since December 2006, after which the bank had a run of negative results due to a stock market crash in 2006, which slashed local banks' brokerage and fund management revenue.

Net income from investment - the equivalent of income from lending in traditional banking - rose 11.5% to 2.03 billion riyals, it said. Income from banking services increased 18% to 454 million riyals, it said, without giving details about other sources of revenue such as from trading and foreign exchange operations.

"The bank continues to achieve growth by diversifying its sources of revenue, and developing the investment and corporate banking sectors along with retail banking," Chief Executive Abdullah Sulaiman Al-Rajhi said in the statement.

Local investment bank KSB Capital forecast Al-Rajhi would post a profit of 1.6 billion riyals.

The bank's earnings in the first quarter would keep it on the path of recovery from the 2006 crash, said Ibrahim Al-Alwan, KSB's deputy chief executive.

"Rajhi could have posted a stronger rise in first-quarter net profit had it not been engaged in expansion in Kuwait and Malaysia, which means important costs and no revenues for a while," Al-Alwan said.

"So the recovery is continuing. Of course it is not showing in double-digit growth figures, but it is slowly making it back to more rational growth figures," he added.

Al-Alwan expects the bank to close the year with 5-10% growth in profit.

Al-Rajhi plans to expand its branch network in Malaysia to 50 from 13 by 2010, the bank's Chief Executive Abdullah Sulaiman Al-Rajhi, told newswire Reuters last year.

It also plans to add 160 branches in Saudi Arabia by mid-2008 and offer more consumer lending by expanding its presence in shopping malls.

The bank also wants to focus more on offering mortgages, car loans, and corporate and investment banking services through 2009, Al-Rajhi's CEO said in August.

Return on equity during the three months to March 31 was 26.9%, the bank said.

Deposits climbed 25.1% to 101.4 billion riyals, net assets 25.6% to 143 billion riyals, and shareholders' equity 15.6% to 24 billion riyals, the bank said.

Shares of Al-Rajhi are down more than 34% this year, compared with about 13% for the main stock index. In contrast, shares of competitor Dubai Islamic Bank are down about 2%.

Chevreux Middle East started coverage of Al-Rajhi last month with an "outperform" recommendation and a target price of 121 riyals ($32.27) per share. The stock last traded at 85.75 riyals. (Reuters)

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