Fitch revises outlook of 4 Saudi banks to ‘negative’

Fitch Ratings has revised the outlook on Al Rajhi Bank, National Commercial Bank ( NCB ), Riyad Bank and Samba Financial Group to “negative” from “stable”, more than a week after the rating agency made the same revision for Saudi Arabia’s foreign and local currency issuer default rating (IDR).

The change also reflects the banks’ long-term IDR, which are at the Support Rating Floor (SRF) for Saudi domestic systemically important banks (D-SIB) of “A+”, due to their high systemic importance, Fitch said in its report on Tuesday.

“This rating would be revised down to ‘A’ in the event of a one-notch downgrade of the Saudi sovereign,” the rating agency said. However, such a revision is not likely, given the government’s strong support for the kingdom’s banking sector.

The A- SRFs of Saudi British Bank (SABB), Banque Saudi Fransi (BSF), Arab National Bank (ANB) and Saudi Hollandi Bank ( SHB ), are below the Saudi D-SIB SRF. “This reflects Fitch's view that the large stakes held in these banks by foreign financial institutions could result in slightly lower willingness (albeit still high) by the sovereign to support these banks and their slightly lower systemic important based on their slightly smaller sizes, franchises and market shares,” the report added.

Saudi Investment Bank (SAIB), Alinma Bank and Bank AlJazira are below the Saudi D-SIB SRF, due to their lower systemic importance within the sector, as well as their smaller market share.