Fitch revises outlook on 6 Saudi banks to 'Stable'

The moves follow similar action on KSA sovereign rating earlier this month

  
A Saudi money changer counts U.S banknotes at a currency exchange shop in Riyadh, Saudi Arabia September 29, 2016. Image used for illustrative purpose.

A Saudi money changer counts U.S banknotes at a currency exchange shop in Riyadh, Saudi Arabia September 29, 2016. Image used for illustrative purpose.

REUTERS/Faisal Al Nasser

Fitch Ratings has revised the outlook on six of Saudi Arabia’s banks to Stable from Negative and affirmed the foreign currency and local currency long-term Issuer Default Ratings (IDRs) at 'BBB+'.

The banks are Arab National Bank, Banque Saudi Fransi, Alinma Bank, Saudi Investment Bank, Bank Aljazira and Gulf International Bank - Saudi Arabia.

According to the agency, the rating actions follow a similar action on Saudi Arabia's sovereign rating earlier this month. All the six banks' long-term IDRs are linked to the Saudi sovereign's and driven by their Support Rating Floors (SRFs), Fitch said.

The rating agency’s assessment is based on the Saudi authorities' strong ability to support the banking system, given large, albeit reduced from their historical levels, external reserves.

It also reflects a long record of support for Saudi banks, irrespective of their size, franchise, funding structure and level of government ownership. “We see high contagion risk among domestic banks given that the market is fairly small and interconnected. We believe this is an added incentive for the state to support any Saudi bank, if needed, to maintain market confidence and stability,” said Fitch.

(Writing by Brinda Darasha; editing by Daniel Luiz)

brinda.darasha@refinitiv.com

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