TEXT-Fitch affirms Bank Aljazira, Aljazira Capital at 'A-'
June 11 - Fitch Ratings has affirmed Bank Aljazira's (BAJ) Long-term Issuer Default Rating (IDR) at 'A-' with a Stable Outlook and its Viability Rating (VR) at 'bb+'. The agency has also affirmed Aljazira Capital's (AJC) Long-term Issuer Default Rating (IDR) at 'A-' with a Stable Outlook. A full list of ratings is at the end of this comment. BAJ's IDRs, Support Rating and Support Rating Floor reflect Fitch's view that there would be an extremely high probability of support from the Saudi authorities, if needed. The Support Rating considers the authorities' strong record of support for Saudi banks. A change in Fitch's view of the willingness or ability of the Saudi authorities to support BAJ could lead to a change in the bank's Support Rating Floor, Support Rating and IDRs and as a consequence those of AJC. However, Fitch does not consider this likely. The VR reflects BAJ's fast retail financing growth, concentrated financing book and declining capital ratios. The VR also considers BAJ's improving profitability and stable asset quality as well as its sound liquidity and funding and relatively small franchise. Downward pressure on BAJ's VR could come from a deterioration in Fitch core capital and Tier 1 capital ratios if Tier 1 equity is not increased to offset fast financing growth. BAJ's capital ratios are at the lower end of the range relative to peers. A deterioration in asset quality could also put downward pressure on the rating. Upward pressure is limited by BAJ's below average capital ratios as well as its fast growth, including rapid growth in mortgage financing despite the absence of the long awaited mortgage law and untested recovery procedures in Saudi Arabia. AJC's IDRs are aligned with and reflect the extremely high probability of support, if needed, from its 100% owner, BAJ. This reflects AJC's strategic importance to its parent. Fitch does not assign AJC a VR. BAJ is a small commercial bank with a market share of 2.7% of total Saudi banking assets at end-Q112. BAJ operates as a fully sharia-compliant Islamic bank offering mainly corporate and retail banking as well as treasury and insurance services in Saudi Arabia. AJC is a fully sharia?compliant company offering brokerage, asset management, corporate finance, advisory and custody services. It is regulated by the Capital Markets Authority (CMA) and was incorporated in February 2008, as per CMA guidelines requiring the separation of investment and commercial banking activities. The rating actions were as follows: Bank Aljazira Long-Term IDR affirmed at 'A-' with a Stable Outlook Short-Term IDR affirmed at 'F2' Viability Rating affirmed at 'bb+' Support Rating affirmed at '1' Support Rating Floor affirmed at 'A-' Aljazira Capital Long-Term IDR affirmed at 'A-' with a Stable Outlook Short-Term IDR affirmed at 'F2' Support Rating affirmed at '1' Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria, 'Global Financial Institutions Rating Criteria' dated 16 August 2011, and 'Evaluating Corporate Governance', dated 13 December 2011, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria Evaluating Corporate Governance
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