Loan growth: Loan growth (1% Q-o-Q) was driven by retail (+3% Q-o-Q) as BSF focuses on home financing. The bank said that it is growing from a small base in home finance and it is gaining market share in this segment. Corporate growth has been muted owing to weak demand and as BSF continues to be selective. The bank’s loan growth so far in 2018 has been subdued (1.4% YTD), however mgmt. is positive on growth picking up in 2019. The govt’s ambitious investment programme, prospects of recovery in private sector consumption and traction on mega projects gives mgmt. confidence of an improvement in credit appetite in 2019.
 
Provisioning: Mgmt. said that NPL trend in the corporate segment has been under control this year. BSF said that while there have been certain isolated delinquencies in the corporate book, overall the NPL formation has been pretty consistent throughout this year.  
 
CASA erosion: The bank’s CASA mix has been deteriorating for the last two quarters. Mgmt. attributes the decline to CASA migration due to rising rates. BSF has a more corporate oriented customer base compared to other banks, and corporate deposits tend to be more rate sensitive. The bank has no CASA target, but as the bank grows in retail it expects its CASA collection to improve.
 
Interest rate hedging: The bank has no plans to abandon its practice of interest rate hedging.
 
Zakat resolution and dividends: Mgmt. stated that there are signs of progress on the Zakat issue and there could be a resolution by the end of the year. The resolution of the zakat issue should not impact the bank’s dividends. (Shabbir Malik, Company)
 
Banque Saudi Fransi: SAR33.00 as of 1 Nov. 2018, Rating: Buy, TP: SAR34.00/share, MCap: USD10,604mn, BSFR AB/1050.SE