Limassol, November 09, 2021 -- Moody's Investors Service ("Moody's") has today
affirmed the long-term deposit ratings of the nine banks it rates
in Saudi Arabia, as well as the senior unsecured and subordinated
debt ratings of their affiliated entities, where applicable.
Moody's has also affirmed the banks' Baseline Credit Assessments (BCA),
Adjusted BCAs, Counterparty Risk Assessments (CRAs) and Counterparty
Risk Ratings (CRRs). At the same time, the rating agency
changed the outlook on the long-term deposit and senior unsecured
debt ratings to stable from negative.
The affected institutions are Saudi National Bank, Al Rajhi Bank,
Riyad Bank, Banque Saudi Fransi, Arab National Bank,
Bank AlBilad, The Saudi Investment Bank, Bank Al-Jazira
and Gulf International Bank -- Saudi Arabia.
The rating action was primarily driven by the banks' resilient performance
and the expectation that the capacity of the Saudi government to support
the country's banks, which results in multiple notch uplift for
banks' deposit ratings from their BCA, will remain unchanged
as indicated by Moody's affirmation of the A1 Saudi government issuer
rating and change in outlook to stable from negative on 5 November 2021
(for details please refer to the press release: https://www.moodys.com/research/--PR_456348).
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL457487
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
-- RATING AFFIRMATIONS
Moody's decision to affirm the ratings of the nine banks that it rates
in Saudi Arabia reflects the resilience in their financial performance,
despite ongoing pressure from the pandemic. The banks have managed
to maintain strong asset quality and capital buffers and their liquidity
buffers remain solid. The Saudi banking system's average
non-performing loan ratio stood at 2.4% as at June
2021 and capital buffers as measured by tangible common equity to risk-weighted
assets stood at 16.4%. The affirmation of the ratings
for all banks also captures the agency's expectation that the high
or very high probability of government support for banks at times of stress
remains intact following the affirmation of the sovereign rating and outlook
change to stable from negative.
OUTLOOKS CHANGED TO STABLE
Moody's decision to change the outlook to stable from negative reflects
the resilience of the operating environment in Saudi Arabia and the expectation
that the capacity of the Saudi government to support the country's banks
will remain unchanged, as indicated by Moody's affirmation of the
A1 Saudi government issuer rating and change in outlook to stable from
negative on 5 November 2021.
Moody's continues to incorporate a high or very high probability of government
support for the long-term deposit and debt ratings of the Saudi
banks and the change in their outlook is largely driven by the change
in outlook to stable from negative on the A1 Saudi government issuer rating.
Moody's high/very high probability of support for the banks in Saudi is
driven by the government's shareholding in the banks, the importance
of the banking system to the country's economy and past track record of
pre-emptively supporting banks.
-- ISSUER SPECIFIC RATING AFFIRMATIONS
Saudi National Bank
The affirmation of Saudi National Bank's A1 long-term deposit ratings
reflects the affirmation of the bank's baa1 BCA and Moody's ongoing expectation
of a very high probability of government support, leading to three
notches of uplift from the BCA.
The affirmation of the bank's baa1 BCA reflects the bank's strong funding
and liquidity, underpinned by its position as Saudi Arabia's largest
bank. It also captures Saudi National Bank's strong solvency,
which includes robust capitalisation with tangible common equity/risk-weighted
assets of 14.9% as at June 2021, solid profitability
and sound asset quality with nonperforming loans at 2% as at June
2021.
Al Rajhi Bank
The affirmation of Al Rajhi Bank's A1 long-term deposit ratings
reflects the affirmation of the bank's a3 BCA and Moody's ongoing expectation
of a very high probability of government support, leading to two
notches of uplift from the BCA.
The affirmation of Al Rajhi Bank's a3 BCA reflects the bank's dominant
Saudi retail franchise, which drives stable and low-cost
funding and high profitability with net income of 2.5% of
tangible banking assets as at June 2021. It also captures the bank's
solid asset quality, strong albeit moderating capital with tangible
common equity/risk-weighted assets of 15.9% as at
June 2021 and healthy liquidity buffers.
Riyad Bank
The affirmation of Riyad Bank's A2 long-term deposit ratings reflects
the affirmation of the bank's baa1 BCA and Moody's ongoing expectation
of a very high probability of government support, leading to two
notches of uplift from the BCA.
The affirmation of the Riyad Bank's baa1 BCA reflects its strong capital
base, with tangible common equity/risk-weighted assets of
15.1% as at June 2021, stable deposit-based
funding, and resilient profitability, with a net income at
1.8% of tangible banking assets as at June 2021, supported
by the bank's solid franchise in multiple business lines.
Banque Saudi Fransi (BSF)
The affirmation of BSF's A2 long-term deposit ratings reflects
the affirmation of the bank's baa1 BCA and Moody's ongoing expectation
of a very high probability of government support, leading to two
notches of uplift from the BCA.
The affirmation of BSF's baa1 BCA reflects the bank's solid profitability
with a net income of 1.4% of tangible banking assets as
at June 2021, derived from a well-established corporate banking
franchise, which also supports its sound capitalisation with a tangible
common equity/ risk-weighted-assets of 16.6%
as at June 2021. The affirmation also reflects the bank's deposit-funded
profile and adequate liquidity.
Arab National Bank (ANB)
The affirmation of ANB's A2 long-term deposit ratings reflects
the affirmation of the bank's baa1 BCA and Moody's ongoing expectation
of a very high probability of government support, leading to two
notches of uplift from the BCA.
The affirmation of the ANB's baa1 BCA reflects the bank's strong overall
solvency, supported by robust capitalisation (with a tangible common
equity/ risk-weighted-assets of 18.7% as at
June 2021), stable deposit-based funding and solid liquidity,
supported by its well-established and defensible franchise.
Bank AlBilad
The affirmation of Bank AlBilad's A3 long-term deposit ratings
reflects the affirmation of the bank's baa2 BCA and Moody's ongoing expectation
of a high probability of government support, leading to two notches
of uplift from the BCA.
The affirmation of the Bank AlBilad's baa2 BCA ratings reflects its young
and growing Islamic banking franchise, supported by a strong remittance
business in the Saudi Arabia. The affirmation also reflects the
strong asset quality with nonperforming financings at 1.2%
of total loans as well as the bank's deposit-funded profile.
In addition, the affirmation of Bank AlBilad's BCA also captures
Moody's assessment that the increasing penetration in consumer portfolio
leads to lower concentration risk which mitigates the rapid growth in
the bank's financing book reflected earlier in a one notch downward
adjustment to the bank's financial profile.
The Saudi Investment Bank (SAIB)
The affirmation of SAIB's A3 long-term deposit ratings reflects
the affirmation of the bank's baa2 BCA and Moody's ongoing expectation
of a high probability of government support, leading to two notches
of uplift from the BCA.
The affirmation of the SAIB's baa2 BCA reflects the bank's stable deposit-funded
profile, supported by its established, although small,
corporate banking franchise, strong liquidity, with liquid
banking assets/ tangible banking assets at 39% as at June 2021
and solid capitalisation, with tangible common equity/tangible assets
of 15.5% as at June 2021.
Bank Al-Jazira
The affirmation of Bank Al-Jazira's Baa1 long-term deposit
ratings reflects the affirmation of the bank's baa3 BCA and Moody's ongoing
expectation of a high probability of government support, leading
to two notches of uplift from the BCA.
The affirmation of the Bank Al-Jazira's baa3 BCA reflects its small
but growing Islamic banking franchise, serving a growing market
segment. It also captures the bank's improved capitalisation with
tangible common equity/risk-weighted assets of 19% as at
June 2021, sound liquidity with liquid assets representing 32%
of tangible banking assets, and stable deposit-funded profile.
Gulf International Bank - Saudi Arabia (GIB KSA)
The affirmation of GIB KSA's Baa1 long-term deposit ratings reflects
(1) the affirmation of the bank's ba3 BCA; (2) one notch of uplift
based on our assumption of a very high likelihood of affiliate support
from its parent, Gulf International Bank BSC (GIB, Baa1 stable,
ba2) in Bahrain; and (3) and Moody's ongoing expectation of a very
high probability of government support, leading to an additional
four notches of uplift from the Adjusted BCA.
The affirmation of the GIB KSA's ba3 BCA reflects the bank's strong capitalisation
with tangible common equity/risk-weighted assets at around 22%
as at June 2021 and sound liquidity buffers with liquid assets representing
32% of tangible banking assets as at December 2020. It also
acknowledges the bank's weaker than system-average asset quality
and profitability.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The BCAs could be upgraded if (1) the solvency profile and liquidity buffers
of the banks improve and/or (2) the operating environment of Saudi improved
materially.
The BCAs could be downgraded if a deterioration in the operating environment
leads to a weakening in solvency and liquidity profiles of the banks.
The long-term deposit and issuer ratings incorporate an uplift
from government support and could be affected by changes in the sovereign
rating or Moody's views on the government's willingness or capacity to
provide support.
The principal methodology used in these ratings was Banks Methodology
published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1280297.
The local market analyst for Al Rajhi Bank, Bank Al-Jazira,
Bank AlBilad, Banque Saudi Fransi, Saudi National Bank,
Samba Funding Limited ratings is Ashraf Madani, +971 (423)
795-42. The local market analyst for Gulf International
Bank - Saudi Arabia ratings is Badis Shubailat, +971
(423) 795-05.
REGULATORY DISCLOSURES
The List of Affected Credit Ratings announced here are a mix of solicited
and unsolicited credit ratings. Additionally, the List of
Affected Credit Ratings includes additional disclosures that vary with
regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL457487
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• EU Endorsement Status
• UK Endorsement Status
• Rating Solicitation
• Issuer Participation
• Participation: Access to Management
• Participation: Access to Internal Documents
• Disclosure to Rated Entity
• Lead Analyst
• Releasing Office
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
Items color coded in purple in this Press Release relate to unsolicited
ratings for a rated entity which is non-participating.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Christos Theofilou, CFA
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Ltd.
Porto Bello Building
1, Siafi Street, 3042 Limassol
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Henry MacNevin
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Cyprus Ltd.
Porto Bello Building
1, Siafi Street, 3042 Limassol
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
