Fitch Ratings has affirmed Saudi British Bank’s (SABB) long-term issuer default rating (IDR) at ‘A’ with a stable outlook. The viability rating (VR) has also been affirmed at ‘a’.
“SABB’s IDRs and VR reflect the bank’s consistent profitability, comfortable liquidity and adequate capital position. The ratings also consider SABB’s strong franchise and the benefits of being an associate bank of HSBC Holding plc and the managerial and specialised expertise provided to SABB under a technical services agreement. The ratings also reflect the concentrations in the loan book and operating environment,” Fitch in a statement said.
SABB has maintained robust profitability and consistent net interest margin despite a slow-down in the domestic credit environment. Impairment charges fell for 2010 and 1H11. Fitch expects net income to continue to compare well with peers.
“Liquidity is healthy, supported by a large pool of liquid assets comprised of cash and balances with Saudi Arabian Monetary Agency (SAMA). Interbank and investments were equivalent to 37% of total assets at end-2010 or 50% of customer deposits; just over half of these assets had a maturity of less than three months,” it added.
SABB recorded a reduction in NPLs at end-2010 and NPLs are appearing to stabilise in 2011. Impairment provisions continued to increase at end-H111 and more than covered (110.7%) impaired loans at end-1H11.
“The bank continued to improve its capital position at end-2010 and 1H11 (Tier 1 11.9%) and internal capital generation remains good. Given SABB’s franchise, Fitch believes that there is an extremely high probability of support from the SAMA if required,” it added.
SABB is the fifth-largest bank in Saudi Arabia with a 9% share of total assets at end-2010 and is 40% owned by HSBC BV, a wholly owned subsidiary of HSBC Holdings plc.