Rating boost for Bank AlJazira

Rating boost for Bank AlJazira
Updated 02 July 2013

Rating boost for Bank AlJazira

Rating boost for Bank AlJazira

Islamic International Rating Agency (IIRA) has assigned a national scale rating of A+/A-1 (SR) (A plus/A-One) to Bank AlJazira.
On the international scale, IIRA has assigned a foreign currency and local currency rating of A-/A-2 (A minus/A-Two).
Outlook on the rating is ‘stable’.
The fiduciary score has been assessed in the range of ‘71-75’, reflecting adequate fiduciary standards.
The fiduciary score is an aggregation of scores assigned to its three sub-sections, namely corporate and Shariah governance, and asset manager quality.
Founded in 1975, Bank AlJazira is one of the four Islamic banks in Saudi Arabia with a growing market share which stood at 3 percent at year-end 2012.
Shareholding of the bank is diversified with significant stakeholders representing prominent business groups and families in Saudi Arabia.
The assigned credit ratings incorporate the bank’s improving asset quality and standalone profitability as well as an adequate liquidity profile and capitalization levels.
Business diversification both in terms of fund sourcing and asset selection will add to the institution’s resilience.
BAJ has grown at a CAGR of 19 percent in terms of asset size over the last three years through continuous expansion in branches and business acquisition.
Following a shift in business focus in 2008, Bank AlJazira has since broadened its business base with an enhanced presence in the corporate segment and a growing exposure toward the retail market.
BAJ, like other banks in the country, remains sensitive to concentration related risks.
While large single exposures are likely to persist in the portfolio, segment-wise broadening will overtime reduce its possible impact, in case of impairment in large financings.
Deposits remain the key funding source of the bank representing around four-fifth of the bank’s funding base, of which, a sizable portion comprises non-remunerative deposits.
Asset growth is expected to propel profitability levels going forward, which are likely to increase in quantum terms over the foreseeable future.