Capital Intelligence, a leading international emerging markets bank rating agency, has raised the financial strength rating of The National Commercial Bank of Saudi Arabia (NCB), while maintaining the bank’s other ratings.
The financial strength rating was raised by two notches from BBB+ to A. The bank’s long-term foreign currency rating of A- and its short-term foreign currency rating of A2 were both affirmed, so that those ratings remained at the same level as the long-term sovereign rating of the Kingdom of Saudi Arabia.
In its announcement, the agency noted strong improvements in both asset quality and profitability. In a major resolution of past non-performing loan (NPL) issues, the bank undertook massive write-offs in 2003, and the added impetus of some recoveries resulted in a stark improvement in asset quality. On the income statement, a greater than usual rise in operating expenses was not enough to offset strong increases in both special commission income and non-commission income, boosting both operating profit and its share of average assets.
Moreover, the bank returned to a sound capital situation, resuming dividend payments and in fact recording a risk asset ratio which was above average for the sector.
Liquidity remains sound, helped by the bank’s continued strength in gathering customer deposits. The bank’s free capital remains low compared to that of its peers, but it is improving and currently there is limited need for it, given the full coverage of the Bank’s non-performing loans.
NCB is Saudi Arabia’s largest bank, and has historically been a retail bank. Founded as a Jeddah-based money-changing operation in 1938, NCB became a joint liability partnership under Saudi law and was granted a banking licence in 1951.
Currently, ownership of the bank resides principally with the Public Investment Fund (69%) and the General Organisation for Social Insurance (10%). A public offering of a portion of this 79% stake is expected shortly. (menareport.com)
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