Overview
- On Sept. 13, 2024, we revised our rating outlook on Saudi Arabia to positive from stable reflecting the potential that ongoing reforms and investments will strengthen the economy while keeping public finances at sustainable levels.
- In our view, this could strengthen the government's capacity to extend extraordinary support to systemically important banks in case of need.
- We view the intrinsic creditworthiness of Saudi National Bank (SNB), Al Rajhi Bank (ARB), and Riyad Bank as stronger than that of other rated Saudi banks.
- Therefore, we revised our outlooks on SNB, ARB, and Riyad Bank to positive from stable and affirmed our ratings on these banks.
DUBAI (S&P Global Ratings) Sept. 18, 2024--S&P Global Ratings today revised its outlook on Saudi Arabia-based Saudi National Bank, Al Rajhi Bank (ARB), and Riyad Bank to positive from stable. At the same time, we affirmed our 'A-/A-2' long- and short-term global scale issuer credit ratings, as well as our national scale ratings on these banks (see the ratings list).
A potential sovereign upgrade implies a government's stronger capacity to support banks if needed. The revision of our rating outlook on Saudi Arabia reflects the potential that the government's wide-ranging reforms and investments will underpin the development of the non-oil economy while upholding sustainable public finances (see "Saudi Arabia Outlook Revised To Positive On Sustained Reform Momentum; 'A/A-1' Ratings Affirmed," published Sept. 13, 2024). This could further strengthen the government's capacity to provide extraordinary support to systemically important Saudi banks in case of need. We view the Saudi government as highly supportive toward the country's banking system. We also view SNB, ARB, and Riyad Bank as highly systemically important banks in Saudi Arabia. Given their stronger intrinsic creditworthiness than that of other rated Saudi banks, a sovereign upgrade could translate into a similar action on these banks.
Al Rajhi Bank (ARB)
ARB's retail focus has boosted growth over the past few years, driven primarily by mortgage loans. We expect growth to increasingly stem from corporate lending in the future. We also expect the cost of risk to remain in check at 40 basis points (bps) to 45 bps over 2024-2026. This, in addition to the bank's recent additional tier one issuance, will support strong capitalization, with our risk-adjusted capital (RAC) ratio averaging 13.0%-14.0% through 2026. ARB's funding profile will also continue to benefit from its strong foothold in retail banking and we anticipate it will maintain adequate liquidity.
Outlook
The positive outlook on ARB reflects that on the sovereign ratings, given the bank's intrinsic creditworthiness and high systemic importance.
Upside scenario: We could raise the ratings if we took a similar action on the sovereign ratings.
Downside scenario: We could revise the outlook to stable in the next 12 months if we were to take similar action on the sovereign ratings.
Ratings score snapshot
| To | From | |||||
|---|---|---|---|---|---|---|
| Issuer Credit Rating | A-/Positive/A-2 | A-/Stable/A-2 | ||||
| SACP | a- | a- | ||||
| Anchor | bbb | bbb | ||||
| Business position | Strong (+1) | Strong (+1) | ||||
| Capital and earnings | Strong (+1) | Strong (+1) | ||||
| Risk position | Adequate (0) | Adequate (0) | ||||
| Funding and liquidity | Adequate and adequate (0) | Adequate and adequate (0) | ||||
| Comparable ratings analysis | 0 | 0 | ||||
| Support | 0 | 0 | ||||
| ALAC support | 0 | 0 | ||||
| GRE support | 0 | 0 | ||||
| Group support | 0 | 0 | ||||
| Sovereign support | 0 | 0 | ||||
| Additional factors | 0 | 0 | ||||
| ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. SACP--Stand-alone credit profile. | ||||||
Riyad Bank
Riyad Bank is the third largest bank in Saudi Arabia. Its capitalization is strong and its loss performance is good due to its share of corporate business. We expect the bank's cost of risk to stay at 70 bps-75 bps. We also anticipate Riyad Bank will continue to use long-term facilities, including syndications where necessary, to extend the average maturity of its funding base, which remains dominated by stable deposits. We also expect it to maintain adequate liquidity.
Outlook
The positive outlook on Riyad Bank reflects that on the sovereign ratings, given the bank's intrinsic creditworthiness and high systemic importance.
Upside scenario: We could raise the rating if we took a similar action on the sovereign ratings.
Downside scenario:
We could revise the outlook to stable in the next 12-24 months if we took the same action on the sovereign ratings, or if we see a significant decline in the bank's capitalization or materially higher credit losses than expected, leading to weaker intrinsic creditworthiness.
Ratings score snapshot
| To | From | |||||
|---|---|---|---|---|---|---|
| Issuer Credit Rating | A-/Positive/A-2 | A-/Stable/A-2 | ||||
| SACP | bbb+ | bbb+ | ||||
| Anchor | bbb | bbb | ||||
| Business position | Adequate (0) | Adequate (0) | ||||
| Capital and earnings | Strong (+1) | Strong (+1) | ||||
| Risk position | Adequate (0) | Adequate (0) | ||||
| Funding and liquidity | Adequate and adequate (0) | Adequate and adequate (0) | ||||
| Comparable ratings analysis | 0 | 0 | ||||
| Support | +1 | +1 | ||||
| ALAC support | 0 | 0 | ||||
| GRE support | 0 | 0 | ||||
| Group support | 0 | 0 | ||||
| Sovereign support | +1 | +1 | ||||
| Additional factors | 0 | 0 | ||||
| ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. SACP--Stand-alone credit profile. | ||||||
Saudi National Bank (SNB)
SNB is the largest bank in Saudi Arabia. It holds well-diversified and equally balanced lending exposures to the retail and corporate sectors. Furthermore, SNB has a strong capital base and a balanced risk profile with exposures spread across various sectors. We expect the cost of risk to increase to only about 40 bps in 2024-2025 in line with higher growth and the contribution of corporate loans. The increase is offset by the bank's significant provisioning efforts over 2020-2021.
Outlook
The positive outlook on SNB reflects that on the sovereign ratings, given the bank's intrinsic creditworthiness and high systemic importance.
Upside scenario: We could raise the rating if we took a similar action on the sovereign ratings.
Downside scenario: We could revise the outlook to stable in the next 12 months if we were to take the same action on the sovereign ratings.
Ratings score snapshot
| To | From | |||||
|---|---|---|---|---|---|---|
| Issuer Credit Rating | A-/Positive/A-2 | A-/Stable/A-2 | ||||
| SACP | a- | a- | ||||
| Anchor | bbb | bbb | ||||
| Business position | Strong (+1) | Strong (+1) | ||||
| Capital and earnings | Strong (+1) | Strong (+1) | ||||
| Risk position | Adequate (0) | Adequate (0) | ||||
| Funding and liquidity | Adequate and adequate (0) | Adequate and adequate (0) | ||||
| Comparable ratings analysis | 0 | 0 | ||||
| Support | 0 | 0 | ||||
| ALAC support | 0 | 0 | ||||
| GRE support | 0 | 0 | ||||
| Group support | 0 | 0 | ||||
| Sovereign support | 0 | 0 | ||||
| Additional factors | 0 | 0 | ||||
| ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. SACP--Stand-alone credit profile. | ||||||
Related Criteria
- Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, April 30, 2024
- General Criteria: National And Regional Scale Credit Ratings Methodology, June 8, 2023
- General Criteria: Hybrid Capital: Methodology And Assumptions, March 2, 2022
- Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Dec. 9, 2021
- Criteria | Financial Institutions | General: Financial Institutions Rating Methodology, Dec. 9, 2021
- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
- General Criteria: Group Rating Methodology, July 1, 2019
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
- General Criteria: Methodology For Rating Sukuk, Jan. 19, 2015
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
Related Research
- Saudi Arabia Outlook Revised To Positive On Sustained Reform Momentum; 'A/A-1' Ratings Affirmed, Sept. 13, 2024
- Your Three Minutes In Banking: GCC Banks Are Well Positioned To Continue Their Strong Run, Sept. 4, 2024
- How Will Saudi Banks Fare In 2024? Feb. 5, 2024
- Full Analysis: Riyad Bank, Dec. 20, 2023
- Tear Sheet: Saudi National Bank, Dec. 18, 2023
- Full Analysis: Al Rajhi Bank, July 4, 2023
Ratings List
| Ratings Affirmed; Outlook Action | ||
|---|---|---|
| To | From | |
|
Al Rajhi Bank |
||
| Issuer Credit Rating | A-/Positive/A-2 | A-/Stable/A-2 |
| Gulf Cooperation Council Regional Scale | gcAAA/--/-- | gcAAA/--/-- |
| Saudi Arabia National Scale | ksaAAA/Stable/ksaA-1+ | ksaAAA/Stable/ksaA-1+ |
|
Riyad Bank |
||
| Issuer Credit Rating | A-/Positive/A-2 | A-/Stable/A-2 |
| Saudi Arabia National Scale | ksaAAA/Stable/ksaA-1+ | ksaAAA/Stable/ksaA-1+ |
|
Saudi National Bank |
||
|
Saudi National Bank, Singapore Branch |
||
| Issuer Credit Rating | A-/Positive/A-2 | A-/Stable/A-2 |
| Ratings Affirmed | ||
|
Saudi National Bank |
||
| Gulf Cooperation Council Regional Scale | gcAAA/--/-- | |
| Saudi Arabia National Scale | ksaAAA/Stable/ksaA-1+ | |
|
SNB Funding Ltd. |
||
|
SNB Sukuk Ltd. |
||
| Senior Unsecured | A- | |
Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.spglobal.com/ratings for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/504352. Complete ratings information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.spglobal.com/ratings. Alternatively, call S&P Global Ratings' Global Client Support line (44) 20-7176-7176.
| Primary Credit Analyst: | Zeina Nasreddine, Dubai + 971 4 372 7150; zeina.nasreddine@spglobal.com |
| Secondary Contacts: | Mohamed Damak, Dubai + 97143727153; mohamed.damak@spglobal.com |
| Tatjana Lescova, Dubai + 97143727151; tatjana.lescova@spglobal.com | |
| Sovereign Analyst: | Zahabia S Gupta, Dubai (971) 4-372-7154; zahabia.gupta@spglobal.com |
| Additional Contact: | Financial Institutions EMEA; Financial_Institutions_EMEA_Mailbox@spglobal.com |
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