Satyendra Pathak
Doha
AlRayan Bank is projected to achieve double-digit earnings growth from 2025 to 2029, reflecting its commitment to long-term strategic goals, QNB Financial Services (QNBFS) has said in a report published on Sunday. QNBFS has maintained a market perform rating with a price target (PT) of QR2.623 per share, reflecting optimism for steady progress.
According to the report, this optimistic outlook is underpinned by the bank’s focus on enhancing asset quality, optimising risk management, and maintaining robust capital buffers.
Despite challenges in the current financial environment, the repoprt, said AlRayanBank’s forward-looking strategy and resilience position it as a key player in driving sustainable growth in the coming years.
The reported a net profit of QR218.9 million for Q4 2024, a 2.2 percent year-on-year (YoY) increase compared to QR214.1 million in Q4 2023. While the results fell short of expectations due to margin pressure and higher credit provisions, the bank’s notable improvement in asset quality and a stable dividend yield (DY) of 4 million provide positive signals for shareholders.
A standout highlight from the report is the significant enhancement in asset quality. The bank reclassified a substantial portion of loans from Stage 2 to Stage 1, with Stage 2 loans decreasing from 30 million of total loans in FY2023 to 20 million in FY2024. This shift underscores the bank’s focus on better risk management and reflects stronger fundamentals. The Non-Performing Loan (NPL) ratio improved to 5.45 million in FY2024, compared to 5.71 million in FY2023, driven by reduced NPLs in the construction and real estate sectors.
Additionally, the repoprt said, the coverage of Stage 3 loans has remained steady, reflecting the bank’s commitment to maintaining financial stability.
The bank’s board of directors declared a flat dividend per share (DPS) of QR0.10 for 2024, consistent
with the previous year, translating into a dividend yield of 4 percent. The payout ratio of 65 percent highlights the bank’s ability to sustain shareholder returns despite a challenging operating environment.
The bank reported a flat sequential performance in net loans at QR110 billion (+1.7 percent YoY), while deposits remained stable, showcasing the bank’s ability to navigate market challenges. The bank also improved its cost of risk (CoR) to 92 basis points (bps) in FY2024 from 108bps in FY2023, aided by a 10.9 percent YoY reduction in net credit provisions.
Despite sequential margin compression and a drop in non-funded income, the report said, the bank’s tangible Return on Equity (RoE) showed a modest improvement to 6.5 percent in FY2024 from 6.4 percent in FY2023.
The bank concluded the year with a robust CET1 ratio of 21.7 percent and a Tier-1 ratio of 22.7 percent, underscoring the bank’s resilience in maintaining strong capital buffers amidst challenging market conditions.
While the bank’s earnings fell short of forecasts this quarter, the report said, the bank’s strategic focus on enhancing asset quality and maintaining stable dividends strengthens its long-term growth trajectory. However, challenges such as margin pressures and credit costs remain areas to watch.
Masraf Al Rayan’s Q4 2024 performance highlights a mix of challenges and achievements. While earnings were impacted by operating income pressures, the bank’s focus on asset quality and stable shareholder returns through consistent dividends underscores its resilience and commitment to long-term value creation.
