TEXT-Fitch affirms Bank Aljazira, Aljazira Capital at 'A-'

Mon Jun 11, 2012 9:30pm IST

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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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