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CI Affirms Ratings of Al Rajhi Bank

Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed the ratings of Al Rajhi Banking & Investment Corporation ( ARB ), based in Riyadh, Saudi Arabia. The Long-term Foreign Currency rating is affirmed at 'AA-', and the Short-term Foreign Currency rating at 'A1.' At the same time, CI affirmed the Bank's Financial Strength rating at 'AA-'. The Outlook for all ratings is 'Stable.' Due to the Bank's prominent 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'.

ARB 's origins date back more than 50 years, when Saleh Abdul Aziz Al-Rajhi started a bullion arbitrage and money-changing house. Several family mergers produced Al-Rajhi Company for Currency Exchange and Commerce (ARCCEC), which operated under the principles of Shari'a and soon became the kingdom's leading money-changer by providing remittance services to expatriates. ARCCEC was issued a banking licence as Al Rajhi Banking & Investment Corporation in 1987 and began operations in 1988 as Saudi Arabia's first fully Shari'a-compliant bank. In 2006, the Bank re-branded itself as Al Rajhi Bank , while retaining its registered name as Al Rajhi Banking and Investment Corporation .

Ratings are underpinned by the Bank's sound asset quality, strong capital ratios and robust profitability. ARB has long been Saudi Arabia's most profitable bank. Its sector-best operating profitability has been based on a financing income (FI) differential which has been far above that of its nearest rivals. Although that gap has narrowed in recent years, it remains the best in the sector, and contributes to the Bank's strong FI.

Historically, the Bank had displayed a higher NPIFF ratio of non-performing Islamic financing facilities (NPIFF) than its peers, but ARB suffered less from the slowing economy and specific defaults in 2009, so that that ratio is now the best in the sector. Strong operating profitability has enabled the Bank to significantly overprovide for that portfolio and report the best coverage ratio as well. A strong capital base further supports its NPL portfolio, and its CAR (Basel II standards) is the best among Saudi banks. The Bank's capital strength and its loyal customer base serve to overcome to some extent a liquidity profile which is tighter than that of the other Saudi banks, although improved in 2010.

Whether by total capital or by total assets at year-end 2010, ARB ranks as the kingdom's third-largest bank (but very close to second ranking by total assets), with total assets of SAR185 billion (a market share of about 13%). The Bank operates the kingdom's largest branch network, and at the close of the year ARB was staffed by a total of 8,527 employees (2009: 8,307).

-Ends-

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 of the issuer for the purpose 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 August 1991. The ratings were last updated in July 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

© Press Release 2011