Riyadh: Tassnief has maintained the long-term national scale entity rating of “(BBB-)’’ (Triple B Minus) and a short-term entity rating of “T-4” assigned to Quara Finance Company ('Quara' or 'the Company'). The assigned ratings reflect adequate creditworthiness, thus low credit risk. Risk profile may exhibit moderately high variation with changes in economic / sector conditions.

Rating Rationale: The assigned ratings incorporate healthy growth in the retail portfolio, sound capitalization indicators supported by a sizeable equity base relative to scale of operations, and adequate financial flexibility through access to bank funding and liquidity buffers to support planned disbursement activity. The ratings also draw comfort from sound sponsor profile with a demonstrated track record of financial support and a strengthened governance framework. However, the ratings remain constrained by weakness in asset quality indicators and resultant pressure on the profitability profile, and the Company’s relatively modest market position. Nevertheless, Tassnief considers the overall balance-sheet risk to remain manageable and supported by the Company’s sizeable equity base.

Gross loan portfolio has depicted growth in 2024 and 9M2025, driven entirely by strong momentum in retail segment, while the SME portfolio continued to contract in line with the Company’s strategic run-off approach. Growth in the retail portfolio is underpinned by a focused origination strategy, higher loan volumes with smaller average ticket sizes, and a significant expansion in the number of channel partners. Asset quality indicators have weakened further on a timeline basis, with Stage-3 non-performing loans increasing, driven primarily by weakness in the retail portfolio and the legacy nature of the SME book. Management has taken a number of initiatives which have resulted in a sharp slowdown in NPL formation over recent months. Translation of management’s initiatives into sustained improvement in asset quality indicators remains important from a ratings perspective.

Profitability has come under increased pressure during the period, as the impact of higher asset yields due to introduction of risk-based pricing was offset by increased funding costs, higher provisioning charge, and increase in operating expenses related to digital onboarding, marketing, and continued investment in IT infrastructure. Expected improvement in profitability will depend on stabilization of asset quality and operating leverage.

Funding profile has continued to evolve. Liquidity remains adequate to cover the targeted disbursements for 2026, supported by a sizeable cash balance, unutilized banking lines, and a fully amortizing funding structure with no bullet maturity. Capitalization remains sound, supported by continued profit retention and the absence of dividend distributions. Leverage indicators remain manageable with largely stable gross-portfolio-to-equity; however, net NPLs-to-equity ratio has trended upwards.

Rating Triggers: Ratings remain dependent on strengthening of market position through sustained portfolio growth, improving asset quality indicators, rationalizing operating costs, and enhancing profitability, while maintaining adequate liquidity and capitalization metrics. Demonstrated improvement in asset quality and a reduction in the net NPLs-to-Tier 1 equity ratio will remain important rating considerations.

About the Company: Quara Finance Company ('Quara' or 'the Company') is a Joint Stock Company registered in the Kingdom of Saudi Arabia under commercial registration number 1010262141 dated February 4, 2009. Quara is actively engaged in providing finance lease, consumer finance, and small and medium enterprise finance services within KSA. The Company operates from its head office in Riyadh. The financial statements for 2024 have been audited by PWC Certified Public Accountants. The auditors have expressed an unqualified opinion on these statements.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext. 6627) at +966-112506627 or email at RS@Tassnief.com.

RELATED CRITERIA AND METHODOLOGY

Rating Methodology for Banks and Finance Companies (v.2. 2024) can be found on the website:
www.tassnief.com