Ratings of The Saudi British Bank lowered; Outlook is â€˜Stableâ€™
Because of the recent change in the Sovereign Ratings of the Kingdom of Saudi Arabia, CI Ratings has lowered the Financial Strength Rating (FSR) and the Foreign Currency Ratings (FCRs) of The Saudi British Bank (SABB), based in Riyadh, Saudi Arabia.
The Long-Term FCR is lowered to ‘A’ from ‘A+’ and the Short-Term FCR is lowered to ‘A2’ from ‘A1’. At the same time, the Outlook is changed to ‘Stable’ from ‘Negative’.
The change in the Sovereign Ratings also affects the Bank’s FSR, which is lowered to ‘A’ from ‘A+’. The Outlook for this rating is also changed to ‘Stable’ from ‘Negative’.
The ratings are supported by SABB’s sound liquidity, strong capital ratios, excellent cost control and the quality of its management as supported by the technical services agreement with HSBC. The ratings are constrained by the fact that asset quality, in respect of coverage by loan-loss reserves and by free capital, has weakened because of a high rate of non-performing loan net accretion. Also constraining the rating is the slower growth in operating profit and the resultant reduction in ROAA. The rating is further constrained by the unavailability of information supplemental to that which is published in the Bank’s financial statements.
In view of the Bank’s ownership, it is expected that its major shareholders would be willing and of adequate means to provide support in the unlikely event it is needed, so the Support Rating remains at ‘2’.