Capital Intelligence (CI), the international credit rating agency, today announced that it has lowered the Financial Strength Rating (FSR) of Bank AlJazira (BAJ), based in Jeddah, Saudi Arabia, to 'BBB' from 'BBB+'. The Outlook, which had been 'Negative', was returned to 'Stable'. At the same time, CI affirmed the Bank's Foreign Currency ratings of 'BBB+' Long-term and 'A2' Short-term, with a 'Stable' Outlook. In light of the Bank's position in the Saudi banking sector, official financial support is expected to be forthcoming in the event it is needed. Consequently, the Support level was affirmed at '2'.
The rating action was underpinned by the financial and non-financial events of 2010. The 'Negative' Outlook had been maintained last year based on uncertainties regarding asset quality and the potential negative effects on the Bank's profitability. While there was some improvement in asset quality in 2010, the cost of doing so did have a negative effect on profitability without raising asset quality to the standard consistent with the 'BBB+' rating. The importance of those factors was compounded by the frequent changes in management over the past three years.
Originally a part of the overseas branch network of the National Bank of Pakistan (NBP), in 1976 BAJ became the first foreign bank to comply with the Saudi law requiring a 60% Saudi shareholding in all banks operating in the kingdom. Subsequent capital increases have reduced NBP's stake in the Bank to 6%. During this time, control of the Bank passed to the Al Rashed Group, at which time BAJ began its movement toward becoming a fully Shari'a-compliant bank in January 2007. Ownership was enhanced in 1997 when a stake was acquired by the Asir Company, which is majority-owned by Saleh Kamel, chairman of the Dallah Al-Baraka Group.
At year-end 2010, the Bank's assets totalled SAR33 billion and its capital totalled SAR4.8 billion, making it the kingdom's third-smallest bank by total assets and its second-smallest by total capital. It claims a market share of 2.4% by total assets. At the end of 2010, the Bank's staff totalled 1,616 (2009: 1,795).
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CONTACT
Primary Analyst
Thomas Kenzik
Senior Credit Analyst
Tel.: +357 2534 2300
Email: tom.kenzik@ciratings.com
Secondary Analyst
Peter McFerran
Senior Credit Analyst
Email: peter.mcferran@ciratings.com
Rating Committee Chairman
Morris Helal
Senior Credit Analyst
The information sources used to prepare the credit ratings include the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents 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 October 1993. 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
© Press Release 2011
