Fitch Ratings agency has revised Al Rajhi Banking and Investment Corporation’s (ARB) Outlook to Stable from Negative, while affirming the bank’s ‘A-‘ Long-Term Issuer Default Ratings (IDR). The agency has also assigned ARB a National Long-Term Rating of ‘AA+(sau)’ with Stable Outlook.
The revision of the Outlook on the IDR to Stable 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. Strong financing growth will continue to support the bank’s earnings in 2021, in the agency’s view.
KEY RATING DRIVERS
IDRs
The Long-Term IDRs of ARB are driven by its standalone strength as captured in its ‘a-‘ Viability Rating (VR).
We assign Short-Term IDRs according to the mapping correspondence described in our bank rating criteria. A Long-Term IDR of ‘A-‘ can correspond to a Short-Term IDR of either ‘F2’ or ‘F1’. The ‘F1’ Short-Term IDR of ARB reflects our view that the bank’s funding and liquidity profiles are a rating strengths.
VR
ARB’s VR is underpinned by a strong domestic retail franchise, which results in a clear funding advantage over peers, robust profitability, superior asset quality, lower concentration risks and healthy capitalisation. It also reflects our view that pressures from the economic environment, due to the coronavirus crisis and lower oil prices, have eased and are now less likely to affect the bank’s financial profile.
ARB’s strong franchise and business model, resulting in sector-leading profitability, are key rating strengths for the bank. Our assessment of its franchise is underpinned by the bank’s position as Saudi Arabia’s leading retail bank and its Islamic status also enables it to capture a large proportion of stable non-profit-bearing deposits.
Source: Fitch Ratings