Fitch Ratings-London-06 August 2012: Fitch Ratings has affirmed Saudi British Bank's (SABB) Long-term Issuer Default Rating (IDR) at 'A' with a Stable Outlook. The agency has affirmed the Viability Rating (VR) at 'a'. A full list of rating actions is below.

RATING DRIVERS AND SENSITIVITIES - IDRs and VR

SABB's IDRs are driven by the bank's VR. The affirmation reflects the bank's consistent profitability, comfortable liquidity and adequate and improving capitalisation. The ratings also consider SABB's strong franchise and the benefits of being a 40%-owned associate bank of HSBC Holdings plc ('AA'/Negative) and the managerial and specialised expertise provided to SABB under a technical services agreement. The ratings also reflect the concentrations on both sides of the balance sheet.

SABB has maintained sound profitability and asset spreads contracted in line with peers in 2011. SABB's credit growth was above market in 2011 and Q112, which should help increase revenues. Impairment charges fell significantly in 2011 and Q112. Fitch expects this trend to continue throughout 2012.

Liquidity is healthy, supported by a large pool of liquid assets comprised of cash and balances with the Saudi Arabian Monetary Agency (SAMA). At end-Q112, interbank placements and investments were equivalent to one-third of total assets. Just over half of these assets had a maturity of less than three months.

Fitch expects headline asset quality ratios to continue to improve for the full year 2012 as the domestic credit environment remains favourable and the loan book expands. Nonetheless, concentrations are a feature of the financing book, and the associated risks were illustrated by the sharp rise in impairments in 2009.

SABB's Fitch core capital ratio remained broadly unchanged in 2011 and Q112 at around 14%. Internal capital generation remains good, supported by improving profitability and moderate dividend pay-out ratios.

Deterioration in the operating environment, profitability, asset quality and/or capitalisation or if SABB no longer enjoyed close links with the HSBC Group could have a negative impact on the bank's IDRs and VR. Conversely, upside potential is limited due to the current high rating level and concentrations.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

SABB's Support Rating and Support Rating Floor reflect the extremely high probability of support from the Saudi authorities, which has been demonstrated in the past. Given the moderate size of the Saudi banking sector in relation to the country's GDP, and the healthy financial position of the Saudi sovereign ('AA-'/Stable), Fitch believes that, in addition to the strong propensity to support, the Kingdom also has the resources to do so.

Changes in Fitch's perception of Saudi Arabia's ability and propensity for support could affect the bank's Support Rating and/or Support Rating Floor.

The rating actions are as follows:

Long-term IDR affirmed at 'A', Outlook Stable

Short-term IDR affirmed at 'F1'

Long-term local currency IDR affirmed at 'A', Outlook Stable

Viability Rating affirmed at 'a'

Support Rating affirmed at '1'

Support Rating Floor affirmed at 'A-'

Senior unsecured - EMTN Programme affirmed at 'A'/'F1'

Senior unsecured notes affirmed at 'A'

Contact:
Primary Analyst
Sebastian Angerer
Analyst
+44 20 3530 1315
Fitch Ratings Limited
30 North Colonnade
London E14 5GN

Secondary Analyst
Philip Smith
Senior Director
+44 20 3530 1091
Committee Chairperson

Eric Dupont
Senior Director
+33 1 4429 9131

Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com; Michelle James, London, Tel: +44 0203 530 1574, Email: Michelle.James@fitchratings.com.

Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

© Press Release 2012