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Announcement:

Moody's affirms NCB Capital's Investment Manager Quality Assessment of MQ1

 The document has been translated in other languages

06 Jan 2021

Paris, January 06, 2021 -- Moody's Investors Service (Moody's) has affirmed the MQ1 investment manager quality assessment of NCB Capital. The MQ1 assessment reflects Moody's view of the asset manager as having excellent management characteristics. NCB Capital was founded in 2007, and is the largest asset manager in Saudi Arabia with SAR 179 billion (USD 47.6 billion) assets under management (AUM) as of September 2020.

ASSESSMENT RATIONALE

This affirmation follows the merger binding agreement between National Commercial Bank (A1 negative), the parent company of NCB Capital, and Samba Financial Group (A1 negative). The merger of the groups - subject to obtention of regulatory approval - will lead to a consolidation of the entities' asset management subsidiaries, NCB Capital and Samba Capital & Investment Management Company (Samba Capital). The merger is expected to be positive for NCB Capital because it will reinforce its position as Saudi Arabia's largest asset manager in terms of AUM, based on the assumption that NCB Capital shall be the surviving entity. Moody's expects that NCB Capital will also benefit from Samba Financial Group's strong corporate and investment banking franchise and well-established risk management practices. Samba Capital is a fully owned subsidiary of Samba Financial Group and is the sixth largest asset manager in Saudi Arabia in terms of AUM. It offers both shariah and traditional products as well as public funds and discretionary portfolio management (DPM) options.

Moody's expects that profitability could be negatively affected because of related expenses and integration risks, but we expect later synergies to support operational efficiency and profitability. The merger also has initial integration risks and a potential loss of focus on executing approved budgets and projects given its size.

The MQ1 investment management quality rating is based on NCB Capital's well defined investment process supported by a qualified team of professionals, a very clear corporate strategy, a deep product offering for the GCC region, above average performance of its funds and sustained growth in AUM over the last five years. The assessment is also based on a strong market position supported by its parent company, National Commercial Bank. Conversely, fiscal and geopolitical risks pose challenges and the firm faces limited geographical diversification by both client domicile and asset class.

Overall, Moody's considers NCB Capital's investment management activities to be excellent, based on the company's disciplined and structured investment process, which is reinforced by strong risk management procedures and controls as well as a robust investment infrastructure.

NCB Capital's investment decision process follows a structured and well-defined analytical approach which includes quantitative and qualitative filters to select investments, coupled with an intensive fundamental analysis based on valuation models and supported by internal research. The approach is primarily bottom-up with a top-down overlay and fundamentally driven. Investment and asset allocation decisions are discussed and made by a committee on a consensus basis.

Moody's noted that NCB Capital follows good risk management and control practices and procedures that are incorporated in the investment process. Proper implementation is supported by manuals, policies and systems. The risk management function has independent lines of reporting to senior management and the board of directors. Risk management decisions are well documented and recorded. Following recent regulatory changes, Moody's noted that NCB Capital has updated its risk management policies and guidelines.

The MQ1 assessment is also based on the strong market position and franchise value of NCB Capital, supported by its parent company. NCB Capital, which is the largest asset manager in Saudi Arabia, exhibits a diverse product offering and a healthy growth trend with respect to AUM.

Moody's commented that NCB Capital's funds have shown good risk-adjusted performance relative to local benchmarks and peers.

NCB Capital's MQ1 assessment would face a downward pressure if: a) The firm's funds risk-adjusted investment performance deteriorates significantly -- both relative to peers and local benchmarks; b) The firm experiences a substantial decrease in AUM; c) There are significant deviations in the firm's investment processes, which increase exposure to operational risks; d) Reduced commitment of National Commercial Bank to the asset management business and e) The merger between NCB Capital and Samba Capital - subject to (i) the completion of the merger of the banks, and (ii) obtention of the relevant regulatory approvals - does not go successfully as expected leading to loss of market share and profitability for the merged entity and departure of key employees.

The framework used in this assessment was Investment Manager Quality Assessments of Asset Managers published in December 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1177533. Alternatively, please see the Framework list at https://www.moodys.com/research/List-of-NCRA-Frameworks--PBC_1178235 for a copy of this framework.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Vanessa Robert
VP - Senior Credit Officer
Financial Institutions Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Marc R. Pinto, CFA
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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