Fitch upgrades Saudi Aramco to stable outlook
The solvency of government support improves the credit rating of Saudi banks
Wednesday – 18 Dhu al-Hijjah 1442 AH – 28 July 2021 AD Issue No. [
The Saudi economy receives a stable rating from Fitch (Middle East)
Riyadh: «Middle East»
And “Fitch” indicated, in a report issued yesterday, that the evaluation was a reflection of a similar procedure with the Saudi sovereign rating at the “A” level, with a stable outlook, pointing to the assessment of Saudi Aramco’s independent credit profile at the level of (aaa+).
She stated that Saudi Aramco – the giant of the global oil industry – benefits from its financial profile from the generation of strong free cash flow before dividend distribution, and the recent increase in financial leverage, noting at the same time that “it is still conservative.
According to Fitch, the Saudi company’s business profile is characterized by large-scale production, huge reserves, low production costs and expansion in the field of petrochemicals.
In addition, Fitch Ratings Agency revealed that it has re-reviewed its outlook for 6 banks operating in the Kingdom, noting that the review ended with the transformation of their credit rating to “stable” instead of “negative”.
According to Fitch forecasts, it reflects the new long-term default rating of foreign and local currencies for banks at (BBB+), noting that the forecasts covered the Arab National Bank, Banque Saudi Fransi, Alinma Bank, The Saudi Investment Bank, Al Jazira Bank, and Gulf International Bank – Saudi Arabia.
The agency pointed out that the assessment takes into account the strong state’s ability to support the banking system, given the large external reserves, if they are reduced from their historical levels, adding that the solvency of the state reflects a long record of government support for Saudi banks, regardless of their size, privileges and financing structure. and the level of government ownership.
Fitch stressed that the stable long-term expectations of the banks whose assessment was re-reviewed is reflected in parallel with the sovereign rating of Saudi Arabia, in which “Fitch” revised in mid-July the current, its future outlook for Saudi GDP from negative to “stable”, confirming its rating at (A). ).
Fitch expected that the reserves of the Saudi Central Bank would increase to reach $470 billion in 2022-2023; Noting that the Kingdom has one of the highest reserve coverage ratios among governments that have rated it in more than 20 months of current foreign payments.
At a time when banks are preparing to disclose the financial results for the second quarter of this year, the banking sector achieved a positive performance during the first quarter of 2021, as the profits of banks listed on the Saudi market during the first three months amounted to nearly 11.9 billion riyals ($ 3.1 billion).
The main reason to consolidate the gains was the increase in provisions, despite the decline in operating income, as banks recorded an increase in profits by 6.6 percent on an annual basis. The local banking sector in the Kingdom witnessed the largest banking merger in the country, which resulted in the largest financier in the local finance market, with the merger of the National Commercial Bank with Samba Financial Group.
In addition, the main Saudi stock index closed yesterday, up 18.80 points, to close at the level of 10916.67 points, with transactions worth 7 billion riyals (1.8 billion dollars), to become the main financial market on a date with the challenge of overcoming the moral barrier at 11,000 points again, which it succeeded in penetrating. last month. The number of shares traded yesterday reached more than 220 million shares, shared by more than 300,000 deals, in which the shares of 112 companies recorded an increase in their value, while the shares of 74 companies closed down.
On the other hand, the Saudi Parallel Shares Index (Nomu) closed down 282.08 points to close at 24373.61 points, with transactions amounting to 38 million riyals ($10.1 million), and the number of traded shares reached 310 thousand shares shared by 1633 deals.