UK-based credit ratings agency Fitch IBCA has lowered the individual rating of Saudi International Bank (SIB) to B/C from B. 'The downgrade is primarily the result of concerns over the vulnerability of the bank's earnings to adverse market conditions,' says Fitch IBCA's Gordon Scott.

He says that, along with a number of other specialist investment banks, SIB's net income fell sharply during the financial crises of 1998. 'The perception that investment securities raise only questions of credit risk has changed, as the experience last year demonstrated that they also carry market risk,' says Scott. 'SIB has worked to reduce the risk on its portfolio following its experience last year.' The bank has reduced trading exposure and many of the lower quality assets have been stripped from the balance sheet. Scott adds that the general perception of SIB's type of risk has altered within the financial community, and SIB's downgrade should be seen in such a context.

Fitch IBCA reaffirmed SIB's short-term and support ratings of F1 and 3 respectively. 'The merger with GIB [Gulf International Bank] brings SIB into a larger financial group which benefits from the strong support of all GCC governments,' says Scott.