Manama, December 27, 2015

Islamic International Rating Agency (IIRA) has reaffirmed the ratings of Bank AlJazira ('BAJ' or 'the bank') on the international scale at 'A-/A2' (SingleA Minus/A Two) and at 'A+(sa)/A1(sa)' (Single A Plus/A One) on the national scale. Outlook on the assigned ratings is 'Stable'. The fiduciary score has also been reassessed in the range of '71-75', reflecting adequate fiduciary standards wherein rights of various stakeholders are adequately protected. The fiduciary score is an aggregation of scores assigned to its three sub-sections, namely Corporate and Shari'a Governance at '76-80', and '66-70' respectively, and an Asset Manager Quality score at '71-75'.

The rating committee has deliberated over the evolving macroeconomic variants in the Kingdom of Saudi Arabia, led by a sharp slide in oil prices. Heightened risk of public financings is noteworthy, although significant increase in corporate defaults is not likely. The consistent growth in business volumes at BAJ, facilitated by expansion in branch network has been noted. The bank's low net impairment ratio and sufficient liquidity held, lends support to the assigned ratings. Although financing counterparty concentration remains higher than desired levels, an improving trend has been noted, which is expected to continue as the bank's business strategy remains focused on developing further presence in retail and mid-tier corporate segments.

Capitalization is adequate and above the regulatory minimum. The bank's profitability position has been supported by the growth in earning assets, but high operating costs associated with growth in operations, have affected the overall returns. The falling Tadawul, may also limit share trading activity with implications of reduced brokerage income from the bank's brokerage subsidiary.

Corporate governance practices of the bank are at par with regional peers and are continuing to improve. The bank has also taken certain steps to strengthen the Shari'a governance framework. For further information on this rating announcement, please contact Mr. Raza Lakhani, CFA at raza.lakhani@iirating.com or email at iira@iirating.com.

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© Press Release 2015