The new ratings are for al-Bank al-Saudi al-Fransi (BSF), Saudi Hollandi Bank (SHB)and Al-Rajhi Banking & Investment Corporation.

Fitch has assigned BSF a long-term foreign currency rating of BBB+, a short-term foreign currency rating of F2, an individual rating of B/C and a support rating of 2. The ratings are supported by France’s Credit Agricole Indosuez’s position as a major shareholder in the bank – it owns a 31 per cent stake.

SHB has been assigned a long-term foreign currency rating of BBB+, a short-term foreign currency rating of F2, an individual rating of B/C, and a support rating of 2. As with BSF, the presence of a strong global financial institution among SHB’s shareholders has supported the ratings. Dutch giant ABN AMROholds a 40 per cent stake in the bank.

‘Fitch’s ratings reflect SHB’s sustained increase in profitability, growing deposit base, strong asset quality and adequate capitalisation,’ says Fitch. ‘Ratings are balanced with potential concerns over the operating environment. Management has focused during the last few years on building relationships with large and medium sized local and multinational companies with a view to using them as a platform to cross-sell retail products and expand the range of products and services to high net worth individuals.’

Fitch has also issued affirmed old, and issued new ratings on the Islamic hybrid financial institution, Al-Rajhi. The bank has received a new, individual rating of B, and a short-term foreign currency rating of F2. Fitch has affirmed Al-Rajhi’s BBB+ long-term foreign currency rating and its support rating of 2.

‘Fitch’s ratings reflect Al-Rajhi’s strong franchise in the Saudi market, exceptional performance record, solid and stable funding base and very strong capitalisation,’ says Fitch. ‘As one of the most profitable banks in the wider Gulf/Middle East region, Al-Rajhi’s performance has been remarkably stable over time and benefits from its Islamic principles whereby it does not pay interest on its customer deposits. It also derives significant revenues from its high volume niche foreign exchange remittance activities.’

The new rating actions by Fitch are part of an ongoing plan to upgrade its coverage of the region’s banks and bring consistency to its coverage following the merger of Fitch IBCA with Thomson Financial BankWatch earlier in the year (Banking, MEED Special Report, 7:9:01, pages 28-33).