- RIYADH: Credit Suisse sees delayed growth and limited upside potential for Saudi banking sector until 2011, saying Middle-East banks have already outperformed their global peers year-to-date.
Margin expansion will likely have to wait until 2011 and is facing pressure from lower yields on fixed income portfolios, analyst Mohamad Hawa said in a note.
Though Saudi banks do not appear cheap from a regional or global perspective, equities is the only asset class in Saudi Arabia likely to attract the bulk of new funds, as real-estate still seems to be stabilizing, he said.
Hawa also said medium-term outlook for the sector remains robust with provisioning at an all-time high and interest rates at all-time lows.
He remains positive on Al-Rajhi Bank, Saudi British Bank and Samba Financial Group due to their high profitability levels.
Samba and Al-Rajhi remain top picks, with low-funding costs and expected expansion in net interest margin in 2011 favoring Al-Rajhi, while Samba has attractive valuation and high liquidity.
The analyst also revised his price target on Saudi banks' stocks.