Fitch affirms Aljazira, Alinma, SAIB’s long-term IDRs at BBB+; resolves RWN

Fitch Ratings affirmed the Long-Term Issuer Default Rating (IDR) of Bank Aljazira (BJAZ), Alinma Bank and The Saudi Investment Bank's (SAIB) at 'BBB+' with Negative outlook, and removed the three banks from Rating Watch Negative (RWN).

The viability rating (VR) of BAJ was maintained at 'BB+', while the VRs of Alinma and SAIB were affirmed at ‘BBB’ and 'BBB-', respectively.

The rating agency placed 10 Saudi banks' VRs on RWN in March 2020 to signal heightened risks of a severe deterioration in the domestic operating environment, following the sharp fall in oil prices and pressures from COVID-19-related economic disruptions.

The affirmation of BJAZ’s VR and the resolution of the RWN on the three banks’ VR follows the publication of their Q3 2020 financial results and reflects the rating agency’s view of a reduced short-term risk of a sudden sharp deterioration in their financial profile.

The impact of the downturn on the banks’ financial metrics has been limited and manageable to date at the current VR level, as they have benefited from good growth in retail mortgages in BJAZ’s case, the high sector growth in Alinma Bank, a cautious risk appetite in SAIB’s case, and large profit-free deposits from the Saudi Central Bank (SAMA) for all three banks.

The IDRs of all three banks are driven by sovereign support as reflected in the banks’ Support Rating Floor (SRF) of BBB+.

The ‘Negative’ outlook on the banks’ IDR mirrors the Saudi sovereign rating, which in turn indicates a potential weakening of the authorities' ability to support the banking system.

BJAZ, Alinma, and SAIB’s Support Rating (SR) and SRF reflect Fitch's view of a high probability of support for the bank, if needed, from the Saudi authorities.