Largest Saudi banks to maintain profitability despite falling interest rates: Moody’s

Saudi Arabia's largest banks, mainly National Commercial Bank (NCB), Al Rajhi Bank, and Saudi British Bank (SABB), will maintain strong profitability despite lower interest rates, Moody's Investors Service said in a report on Monday.

"SABB will be hardest hit because it must also absorb the costs of its merger with smaller peer Alawwal Bank, and NCB will face a similar pressure if its planned merger with Riyad Bank is completed," Ashraf Madani, VP-Senior Analyst at Moody's said in the report.

"Al Rajhi's retail focus will provide initial protection, but prolonged low rates will take their toll. Nevertheless, sound efficiency and strong capital at all three banks will protect their credit profiles," he added.

The report further noted that fee based income will start to stabilize over the coming quarters as fees attached to rising consumer lending and mortgages offset lower trade and foreign-exchange income.

NCB has the largest and most stable non-interest income and it is expected to maintain its lead, Moody’s noted.

The rating agency also added that large Saudi banks will maintain very efficient cost structures.

“SABB's corporate focus delivers the strongest efficiency. Both NCB and Al Rajhi carry the cost of larger branch networks to service their sizeable retail businesses,” it noted