Monday, Dec 12, 2011


 
 
The following is a press release from Fitch Ratings:

Fitch Ratings-London-12 December 2011: Fitch Ratings has affirmed Al Rajhi Bank's (Al Rajhi) Long-term Issuer Default Rating (IDR) at 'A+' with a Stable Outlook and its Viability Rating at 'a'. A full list of ratings is at the end of this comment.

Al Rajhi's IDRs and Support Rating reflect Fitch's view that there is an extremely high probability that the Saudi Arabian authorities would support the bank, if required. This view is based on Al Rajhi's leading retail franchise in the Kingdom and its systemic importance within the domestic banking system. A change in the IDRs would result from any change in the ability or willingness of the Saudi authorities to support Al Rajhi. Fitch does not view this as likely at present.

The affirmation of the Viability Rating reflects Al Rajhi's strong profitability, stable asset quality and large retail deposit base, whilst also considering some name concentration within the corporate loan portfolio in line with other Saudi banks.

Al Rajhi's profitability ratios remained strong in 9M11, with operating ROAA and ROAE of 3.6% and 24.2%, respectively. Core revenue generation is strong, supported by healthy margins, robust growth in fee income and good cost efficiency. The lower interest rate environment in Saudi has squeezed asset spreads in recent years, but Al Rajhi benefits from low funding costs from its significant pool of non-remunerated customer deposits. The net interest margin (NIM) declined to 4.9% at end-9M11 (2010: 5.8%), but remains higher than its peers, reflecting the bank's extremely low cost of funds. Fitch expects operating profitability to remain strong in 2011 and 2012.

The bank's asset quality ratios compare well with peers, with an impaired loans ratio of 1.6% (2010: 2.2%), and healthy reserve coverage of 153% (2010: 125%). At end-9M11, liquid assets, consisting of cash, interbank placements and an investment portfolio - most of which is placements with the Saudi Arabia Monetary Agency (SAMA), accounted for 34% of total assets, or 42% of total deposits. Fitch views the bank's capitalisation as sound, with regulatory Tier 1 and Fitch core capital ratios of 14.9% and 18.1%, respectively, at end-9M11 (end-2010: 15.2% and 19.6%, respectively)

Al Rajhi is the largest Islamic bank globally and operates the largest branch network in Saudi Arabia. Its main shareholders are members of the founding Al Rajhi family (41% holding) and the Saudi government (via the General Organisation for Social Insurance - about 10%). The bank commenced operations in Malaysia through a wholly-owned Islamic banking subsidiary in 2007 and more recently set up small operations in Kuwait and Jordan.

The rating actions are as follows:

- Long-term IDR: affirmed at 'A+'; Outlook Stable

- Short-term IDR: affirmed at 'F1'

- Viability Rating: affirmed at 'a'

- Individual Rating: affirmed at 'B/C'

- Support Rating: affirmed at '1'

- Support Rating Floor: affirmed at 'A+'

Contact:

- Primary Analyst

- Shaun Miskell

- Analyst

- +44 20 3530 1504

- Fitch Ratings Limited

- 30 North Colonnade

- London E14 5GN

Secondary Analyst

- Philip Smith

- Senior Director

- +44 20 3530 1091

Committee Chairperson

- Michael Steinbarth

- Senior Director

- +44 20 3530 1367

Media Relations: Michelle James, London, Tel: +44 0203 530 1574, Email: Michelle.James@fitchratings.com.

Additional information is available at 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.

Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 16 August 2011, is available at www.fitchratings.com.

Applicable Criteria and Related Research:

- Global Financial Institutions Rating Criteria

- http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

(END) Dow Jones Newswires

12-12-11 1107GMT