Fitch Ratings revised its outlook on Saudi National Bank (SNB), the country’s biggest lender, to stable from negative, citing its resilient financial metrics and an improving operating environment.
Fitch also affirmed the bank’s long-term issuer default rating (IDR) at ‘A-‘. The agency has also assigned SNB a national long-term investment grade rating of ‘AA+(sau)’ with a stable outlook.
“The revision of the outlook reflects our view that pressures on the operating environment from the pandemic and lower oil prices have eased sufficiently, and that the financial metrics of the bank have been resilient in the past quarters, despite these pressures,” Fitch said. “Strong financing growth will continue to support the bank’s metrics in 2021.”
SNB’s first quarter net profit jumped 20 per cent o 3.4 billion Saudi riyals ($907 million), boosted by higher fee income and lower impairment charges as the kingdom’s economy rebounds from the Covid-19 pandemic.
Brent, the international benchmark for up to two thirds of the world’s oil pricing, closed up 0.59 per cent at the end of trading last week to $73.51. West Texas Intermediate, a gauge of US oil, gained 0.84 per cent last week to close at $71.64.
Fitch said Saudi Nation Bank’s ‘A-‘ viability rating, which represents its view of the lender’s creditworthiness, was underpinned by “a strong company profile supporting well-diversified and resilient earnings, strong funding and liquidity, as well as sound asset quality and capitalisation.”
SNB was created through the merger of National Commercial Bank and smaller rival Samba Financial Group. SNB, which began operating on April 1, has more than 896bn riyals ($239bn) in assets.
SNB’s exposure to the retail segment declined to 39 per cent of total loans at end-2020 from 50 per cent, due to Samba’s strong corporate focus, the ratings agency added.
SNB’s retail loans are expected to ramp up in 2021-2022 due to a high appetite for that segment, supported by a strong domestic franchise, Fitch said.
“We believe the strengthening of the franchise fostering non-interest bearing (NIBs) customer deposits and rapid loan growth in the high-yielding mortgage segment will support SNB’s earnings generation,” the agency said.
In addition to improving business conditions, this should support a recovery in the core profitability metric by 2022, it said.
The Public Investment Fund, the kingdom’s sovereign wealth fund, is the biggest shareholder in SNB with a 37.2 per cent stake. The Public Pension Agency has 7.4 per cent and the General Organisation for Social Insurance owns 5.8 per cent.
Last week, Saudi Arabia said it is merging general insurance and public pension funds to create a public sector entity with $29bn in domestic and foreign stock holdings.
The combination of the two state-run funds is an extension of “continuous reforms” and part of an organisational restructuring process, in line with the kingdom’s Vision 2030 objectives, minister of finance Mohammed Al Jadaan, said in a statement on Thursday.
