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The rating agency said that the revision of the four banks’ outlook to stable follows the recent raising of Saudi Arabia’s sovereign rating to stable.
Wednesday 19, December 2018 BY KUDAKWASHE MUZORIWA
CI Ratings has revised the outlook rating of four Saudi-based lenders from negative to stable citing that their financial strength rating (FSR) is supported by very strong capitalisation metrics, good liquidity as well as sound asset quality despite some weakening and solid profitability at both the operating and net levels.
In a statement, the rating agency stated that the operating environment in the Kingdom remains a rating constraint for all banks, although the recent firmness in oil prices should provide some relief to government finances.
SABB was rated A and the bank is said to be benefiting from a credit culture which includes the use of many of the systems and controls of HSBC, which continues to support the bank through a long-standing technical services agreement.
CI also affirmed its A+ financial strength rating on Riyad Bank, Samba Financial Group and Banque Saudi Fransi, which are all supported by good asset quality and strong loan loss reserve as well as effective coverage ratios, strong liquidity, sound profitability and strong capital adequacy.
Additionally, Riyad Bank’ rating reflect the support the lender receive from its major shareholders, which are all semi-government agencies and the likelihood of official support for the fourth largest bank in the Kingdom.
While liquidity ratios of these lenders are average for the sector, their position is good by global standards and liquidity is not really an issue for any Saudi bank at present, added CI Ratings. CI expects SAMBA to maintain strong asset quality, high liquidity and rock-solid capitalisation.
Saudi Arabia plans to increase state spending by seven per cent next year in an effort to spur economic growth that has been hurt by low oil prices.