International emerging market bank rating agency Capital Intelligence (CI) has raised its financial strength rating for Arab National Bank (ANB) of Saudi Arabia, from A- to A. The long-term foreign currency rating was maintained at A- and the short-term foreign currency rating at A2.
Both ratings compare to the sovereign rating for the Kingdom of Saudi Arabia, which is currently at A- long-term and A2 short-term. A stable outlook was appended.
CI noted that the upgrade was based in large part on solid improvements made in the bank’s asset quality and profitability. In 1998 new management at ANB had addressed the issue of problem loans, using strict standards of classification and making the necessary provisions over the period of several years. The immediate effect was negative on both profitability and asset quality, but the bank has steadily improved in both areas, while it continues to display one of the best overall liquidity positions in the kingdom.
The agency observed that while the bank’s NPL ratio is still one of the kingdom’s highest, it is to a great extent the result of ANB’s aversion to writing off historical and fully provisioned loans. In terms of profitability, the kingdom’s best interest differential overcomes some weaknesses in other areas, and with an improving cost ratio the bank’s operating profitability continues to grow. With NPLs fully provided, ANB has the opportunity to greatly expand its net profit in 2003 and beyond.
ANB was founded in 1980 when the Saudi branches of Jordan’s Arab Bank were capitalized into one of Saudi Arabia’s several foreign joint-venture banks. Arab Bank subscribed to 40 percent of ANB’s capital, and has held that stake ever since. Most of the remaining shares are widely held, except for about 15 percent owned by Rashed A Al-Rashed & Sons.
The bank has been characterized by its ties to the kingdom’s large Palestinian community. Its credit exposure has historically been to commercial companies, and more recently Saudi Arabia’s blue-chip companies. With 116 domestic branches, ANB has total assets of $11.8 billion, and claims a market share of about nine percent. — (menareport.com)
© 2003 Mena Report (www.menareport.com )