Moody’s confirms the ratings of Saudi banks

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Riyadh – Mubasher: Moody’s Investors Service Agency confirmed today, Tuesday, all the eleven Saudi bank rankings and ratings that the agency classifies in the Kingdom of Saudi Arabia.

The agency changed the outlook for long-term deposit ratings from stable to negative for ten of these banks and maintained a negative outlook for long-term deposit ratings for one of these banks.

It is noteworthy that Moody’s classifies the Kingdom of Saudi Arabia in the category A1 with a negative outlook.

The agency said in a report today obtained directly from him, that this classification came after its decision to change the outlook from stable to negative for the classification of the Kingdom of Saudi Arabia in the category A1 issued in early May.

The agency added that its decision reflects its view that the current rankings still reflect flexibility in its financial performance backed by strong capital reserves, stable financing structures and abundant liquidity reserves. The classification reasons for each bank can be found separately later in this press release.

Negative outlook

The agency said that the negative outlook comes, to a different extent, with a combination of the following:

1) The first is the possibility of the government’s weak ability to support Saudi banks, and this also applies to the Saudi Fransi Bank (BSF) Whose deposits carry a long-term negative outlook before this classification procedure.

2) Weak environment of operating conditions faced by Saudi banks.

3) The challenges faced by the Saudi British Bank (SABB), Al Bilad Bank and the Saudi Investment Bank (SAIB(The Banque Saudi Fransi)BSF) Separately, as these challenges are closely related to one or more of their solvency factors.

And for the Saudi French Bank (BSF), His outlook has been negative since March 2020, but it also now reflects the factors behind this classification procedure.

The agency indicated that it continued to include a high / very high probability of government support for Saudi bank rankings due to government contributions, the importance of the banking services and payment system and the previous record of proactive government support.

Weak environment of operating conditions

The agency noted that the second driving factor in the negative outlook is the weak operating conditions environment against the backdrop of low oil prices, reduced government expenditures and an outbreak of the Corona virus, which if it continues for a long time, may lead it to reduce its assessments related to the operating conditions environment.

The agency expects that the cut in government expenditures announced in the 2020 budget will affect the non-oil sector of the state’s economy as all banks conduct most of their business (expected contraction -4 percent for 2020 compared to a growth rate of 3.3 percent in 2019).

At the same time, she added, travel restrictions aimed at stopping the outbreak of the Corona virus were hindered by the activity of the tourism sector, especially pilgrimages to Mecca and Medina.

The agency considered the outbreak of the Corona virus a social risk within the framework of corporate governance and social and environmental responsibility, as it has major implications for public health and safety.

Challenges faced by some banks separately

The agency said that the negative outlook for the Saudi British Bank and the Saudi Investment Bank (SAIB(The Banque Saudi Fransi)BSF) And Bank Albilad, the current pressures reflect the independent credit reality of banks.

The National Commercial Bank (NCB)

The agency confirmed the long-term classification of National Commercial Bank deposits in the A1 category, which reflects the confirmation of the bank’s primary credit rating in category baa1 and the continuation of Moody’s expectations that there is a very high probability of providing government support, which led to a three-point increase in the basic credit evaluation (BCA).

The agency said that the confirmation of the rating also reflects the strength of the bank’s solvency due to the strong level of capitalization that contains assets weighted by risks / tangible property rights of 15.1 percent as of December 2019, and flexible profitability with net income of 2.2 percent of the bank’s tangible assets as It is in December 2019.

Al Rajhi Bank (Al Rajhi)

Moody’s confirmed long-term Al Rajhi Bank deposit ratings in Category A1 confirmed the bank’s basic credit rating (BCA) in category a3 and continued Moody’s expectations of a very high probability of providing government support, which resulted in a two-degree increase in BCA.

She added that the confirmation of the basic credit rating reflects the bank’s position in the retail banking market in the Saudi market, which stimulates the existence of low-cost, stable financing and high profitability with a net income of 2.6 percent of the bank’s tangible assets as in December 2019.

She continued that the rating assurance reflects the quality of the bank’s strong assets and the level of strong capitalization with risk-weighted assets / tangible equity of 18.5 percent as of December 2019, and good liquidity reserves.

Riyad Bank

The agency confirmed long-term bank deposit ratings in class A2, reflecting the bank’s primary credit rating confirmation in category baa1 and the continuation of its expectations of a very high probability of providing government support, which led to a two-degree increase in basic credit assessment (BCA).

She added that confirmation of valuation reflects the strong capital base and presence of risk-weighted assets / tangible property rights of 15.5 percent as of December 2019, stable and deposit-based financing, and strong profitability with a net income of 2.1 percent of the bank’s tangible assets as in the year 2019, supported by its strong position in various areas of the bank’s work.

The Saudi British Bank (SABB)

The agency confirmed long-term deposit ratings in Category A1, reflecting confirmation of the bank’s primary credit rating in category A3 and the continuation of its expectations for a very high probability of providing government support, which led to a two-degree increase in Basic Credit Rating (BCA).

She said that the evaluation confirmation reflects the bank’s stable financing and strong liquidity, with liquid assets representing 32 percent of the bank’s tangible assets. It also reflects the bank’s strong capitalization with tangible risk / equity assets at 17.7 percent as of December 2019, in addition to the efficiency and strong profitability supported by the bank’s position in the corporate sector.

She added that the negative outlook for the bank’s long-term deposit ratings reflects the constant pressure on the quality of the bank’s assets with the ratio of non-performing loans rising to 4.9 percent (4.4 percent if we exclude the balance of non-performing loans that are still under the “regulatory experiment period”) as in December / December 2019 compared to 3.3 percent in 2018, which reflects difficult operating conditions and the acquisition of the first PIC loan portfolio after the merger of the two banks in June 2019.

Samba Financial Group

Moody’s confirmed long-term Group Deposit ratings in the A1 category, reflecting the bank’s primary credit rating of A2 and the continuation of its expectations for a very high probability of government support, which resulted in a higher than base credit rating (BCA).

Moody’s said, confirming the bank’s primary credit rating reflects its financing and strong liquidity with liquid assets representing 35 per cent of the bank’s tangible assets as in December 2019; in addition to its strong financial solvency with large capital reserves (the tangible property rights are around 18.5 per cent Of the tangible assets as of December 2019).

She added that the confirmation of the evaluation also reflects the recent weakness in the quality of the bank’s assets and recurring profitability due to provisions for covering high loan losses in 2019.

Arab National Bank (ANB)

Moody’s confirmed long-term bank deposit ratings in category A2, reflecting the bank’s primary credit rating (BCA) confirmation in category baa1 and the continuation of its expectations for a very high probability of government support, which led to a two-degree increase in basic credit assessment (BCA).

She said the valuation confirmation reflects its overall financial solvency strength supported by strong capitalization (with risk-weighted assets / tangible equity equity of 16.45 percent as in December 2019), stable deposit-based financing and strong liquidity backed by its position in the bank’s business areas.

Banque Saudi Fransi (BSF)

Moody’s confirmed long-term bank deposit ratings in Category A1, reflecting the Bank’s Basic Credit Rating (BCA) confirmation in Class A3, and its profitability with a net income of 1.8 percent of the bank’s tangible assets as of December 2019), supported by its solid position In the corporate banking sector, which in turn supports its strong capitalization with tangible risk / equity assets of 17.15 percent as of December 2019.

She added that the confirmation of the classification also reflects the evaluation of the portfolio funded by deposits and sufficient liquidity.

She noted that the long-term change in the outlook for deposit classifications from stable to negative in March 2020 reflects the current pressures on the bank’s financial solvency, especially the quality of assets with non-performing loans by 3 percent, in addition to the decrease in liquidity reserves with the decrease of liquid assets to 23 Percentage of the bank’s tangible assets as in December 2019 compared to 32 percent in 2018.

The Saudi Investment Bank (SAIB)

The agency confirmed long-term bank deposit ratings in the A3 category, reflecting the confirmation of the bank’s primary credit rating in the baa2 category, and the continuation of its expectations for a high probability of providing government support, which led to a two-step increase in the basic credit rating (BCA).

She said that confirming the bank’s primary credit rating reflects its stable portfolio funded by deposits and backed by a firm position in the banking sector for the corporate sector despite its small size, strong liquidity with the bank’s liquid assets / bank assets tangible by 39% as in December 2019 and its good capitalization With tangible equity / tangible assets at 13.2% as of December 2019.

Al Jazeera Bank

The agency confirmed long-term bank deposit ratings in the Baa1 category, reflecting the bank’s primary credit rating (BCA) confirmation in the baa3 category and the continuation of its expectations of a high probability of providing government support, which resulted in a two-degree increase in the basic credit assessment (BCA).

She said that confirming the bank’s primary credit rating reflects its small and continuous growth field in Islamic banking, as it serves the growing market segment, as well as an improvement in the bank’s capitalization with tangible equity / risk weighted assets of 18.1% as in December 2019, In addition to its strong liquidity, which represents 34% of the bank’s tangible assets, and its stable portfolio funded by deposits.

the National Bank

Moody’s confirmed long-term bank deposit ratings in the A3 category, reflecting the bank’s primary credit rating (BCA) confirmation in the baa2 category and the continuation of its expectations for a high probability of providing government support, which resulted in a two-degree increase in the primary credit rating (BCA).

She stated that confirming the bank’s primary credit rating reflects its small and continuous growth field in Islamic banking, supported by the bank’s strength in the area of ​​financial transfers in the Kingdom of Saudi Arabia.

“It reflects the quality of the strong assets with non-performing financing by 1.2% of total debt in addition to its stable portfolio funded by deposits and high liquid asset levels, which represent 25% of the bank’s tangible assets as of December 2019.”

She noted that the negative outlook reflects the weak capital reserves of Al Bilad Bank amid the rapid growth of loans and dividends with the lowest percentage of tangible property rights / risk weighted assets represented by 12.4% in the Saudi banking system as it is in December 2019.

Gulf International Bank – Saudi Arabia (GIB KSA)

Moody’s said that the long-term confirmation of Gulf International Bank – Saudi Arabia (GIB KSA) deposit ratings in category Baa1 reflects the confirmation of the primary credit rating (BCA) of the bank in category ba3; Very supportive from the parent bank, Gulf International Bank BSC in Bahrain (Gulf International Bank rated Baa1 with a negative outlook, ba2).

She added that the confirmation of the evaluation also reflects the continuation of her expectations of a very high probability of providing government support, which led to a four-step increase in the revised Basic Credit Rating (BCA).

She continued: “Confirmation of the bank’s primary credit rating (BCA) in class ba3 reflects the bank’s strong capitalization with tangible equity / weighted assets risk of 29% as of December 2019, and strong liquidity reserves with liquid assets representing 30% of assets The bank is tangible. It also reflects the poor quality of the bank’s assets and profitability. ”







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