Ratings of Riyad Bank lowered; Outlook is â€˜Stableâ€™
Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, has lowered the Financial Strength Rating and the Foreign Currency Ratings (FCRs) of Riyad Bank (RB), based in Riyadh, Saudi Arabia, because of the recent change in the Sovereign Ratings of the Kingdom of Saudi Arabia.
The Long-Term FCR is lowered to ‘A+’ from ‘AA-’ and the Short-Term FCR is lowered to ‘A1’ from ‘A1+’. At the same time, the Outlook is changed to ‘Stable’ from ‘Negative’. These ratings are constrained by the sovereign rating.
The change in the Sovereign Ratings also affects the Bank’s FSR, which is lowered to ‘A+’ from ‘AA-’. The Outlook for this rating remains ‘Stable’.
The ratings are supported by RB’s consistently strong capital profile, improved asset quality in terms of the non-performing loan ratio, as well as coverage by loan-loss reserves and free capital, and its solid liquidity profile. The ratings are constrained by the greatly increased concentration in non-bank deposits, low and declining operating profitability, and the current operating environment. The softness of the economy has the potential to produce weakness in asset quality, tighter liquidity and higher funding costs.
In view of the Bank’s prominent position in the Saudi banking sector, official support is expected to be forthcoming in the unlikely event it is needed. Consequently, the Support Rating remains at ‘2’.