Al Rajhi Banking and Investment (1120) Q4 2023 earnings summary

Executive summary

• FY 2023 net profit after Zakat fell 3.1% to SAR 16.621bn, mainly as higher funding costs compressed margins.

• Total assets rose 6.1% to SAR 808.1bn and net financing increased 4.6% to SAR 594.2bn.

• Selective business growth and digital services remained priorities; 96% of new accounts were opened through the mobile app.

Financial highlights

• Operating income declined 3.7% to SAR 27.531bn; net financing and investment income fell 4.1% to SAR 21.269bn.

• Operating expenses rose 0.6% to SAR 7.498bn, while pre-provision profit decreased 5.2% to SAR 20.033bn.

• Net impairment charges fell 24.8% to SAR 1.504bn, supported by lower gross charges and higher recoveries.

• 4Q net income after Zakat was SAR 4.171bn, down 5.3% YoY.

Outlook and guidance

• FY 2024 financing growth guided to mid single digits; NPM target is 5–15 bps above FY 2023’s 2.99%.

• FY 2024 targets: cost-to-income ratio below 27%, ROE above 19%, cost of risk 0.25%–0.35%, and Tier 1 ratio above 20%.

• Interest rates are expected to decline; gross yields are expected to continue outpacing funding costs, with rates influencing credit demand and deposit mix.