Earnings up 16% Q-o-Q; beat EFGe and consensus. Riyad Bank reported 4Q18 net profit of SAR1,352mn, +16% Q-o-Q and +39% Y-o-Y. Earnings were 9% ahead of our estimate of SAR1,238mn and 18% ahead of consensus of SAR1,139mn. For full year 2018, Riyad’s earnings were up c20% Y-o-Y to SAR4.7bn on stronger net interest income and lower provisioning.
 
Our take on the results: A good set of results driven by core earnings drivers. Loan growth was solid at 4% Q-o-Q (9% Y-o-Y). The bank’s spreads widened 13bps Q-o-Q (41bps Y-o-Y) to 3.05%, driven by higher yield. This was the fourth straight quarter of sequential spread expansion for the bank. Headline numbers suggest that provisioning was lower-than-expected. We estimate that the  cost of risk was 52bps, compared to 83bps in 2Q18 and 99bps a year ago (EFGe 78bps). Riyad’s credit quality metrics going into the year-end were good:  NPL ratio was down 20bps Q-o-Q to 0.9% while NPL coverage was at 200%. Deposit growth was strong at 7% Q-o-Q, and we believe that the increased funding from deposits was partly used to replace wholesale funding.
 
Positives: Spreads (+13bps Q-o-Q to 3.05%); Loan growth (+4% Q-o-Q; + 9% Y-o-Y); Low provisioning (cost of risk 52bps vs. EFGe of 78bps). 

Riyad Bank: SAR22.20 as of 30 Jan. 2019, Rating: Buy, TP: SAR20.00/share, MCap: USD17,760mn, RIBL AB/1010.SE