May 06 2011 |
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CI Adds 'Positive' Outlook to Rating of Samba Financial Group
Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed the ratings of Samba Financial Group (SAMBA), based in Riyadh, Saudi Arabia. The Long-term Foreign Currency rating is affirmed at 'AA-', the Short-term Foreign Currency rating at 'A1,' with a 'Stable' Outlook. At the same time, CI affirmed the Bank's Financial Strength rating at 'AA-', and the Outlook is changed to 'Positive' from 'Stable.' In view of the Bank's position in the Saudi banking sector, official financial support is expected to be forthcoming in the unlikely event it is needed. Consequently, the Support level remains at '2'.SAMBA began operations in the kingdom in 1955 as two branches of US-based First National City Bank (later Citibank and then Citigroup ). In 1980, in accordance with Saudi law, those branches were capitalised and converted into a joint-venture bank, and Citibank subscribed to the maximum permissible 40% stake.
Citigroup reduced its stake in several stages, disposing of all of its interest in 2004. Currently, about 96% of the Bank's shares are held by Saudi shareholders, including 50.3% held by Saudi government-related entities and the remaining 49.7% by the general public.
The ratings are underpinned by the Bank's best capital ratios in the sector, second-best overall liquidity and an average non-performing loan (NPL) portfolio with full and better than sector-average coverage by loan-loss provisions. Ratings are constrained by the fact that operating profit and net profit have been slipping in recent years. While there is some concentration by individual borrower, other factors such as the quasi-government nature of some of those borrowers, as well as the Bank's strong NPL coverage, mitigate that risk. The 'Positive' Outlook is predicated on the balance-sheet adjustments the Bank has been making in anticipation of the economy eventually turning around and interest rates beginning to rise; a significant improvement in the profit profile without significant deterioration in other areas would be considered as cause for an upgrade in that rating in the next year.
At year-end 2010, SAMBA ranked as the kingdom's second-largest bank by total assets (SAR187 billion, for a market share of about 14%). By total capital (SAR24.9 billion) the Bank ranked fourth in size among Saudi banks. At the close of the year SAMBA operated a network of 68 branches and employed 3,135 full-time direct staff (2009: 3,120).
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For more information, please contact:
Primary Analyst
Tom Kenzik
Senior Credit Analyst
Tel: +357 2534 2300
E-mail: tom.kenzik@ciratings.com
Secondary Analyst
Peter McFerran
Senior Credit Analyst
E-mail: peter.mcferran@ciratings.com
Rating Committee Chairman
Morris Helal
Senior Credit Analyst
The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents for the purposes of the rating, and considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in April 1989. The ratings were last updated in June 2010. The principal methodology used in determining the ratings is Bank Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com
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