BANGALORE: Fitch Ratings has affirmed National Commercial Bank’s (NCB) ratings at Long-term issuer default (IDR) ‘A+’ with stable outlook, short-term IDR ‘F1’, individual ‘B’ and support ‘1’. The support rating floor is affirmed at ‘A+’.
NCB’s Long-and short-term IDRs and support rating reflect the extremely high probability of support from the Saudi authorities, should it be required. Fitch’s view of support is based on the strong history of support provided by the Saudi Arabian Monetary Agency (SAMA), the Saudi government’s majority stake and the bank’s large franchise in Saudi Arabia (‘AA-’ (AA minus)/stable).
The individual rating reflects the bank’s leading domestic franchise, strong profitability and sound capitalization. It also considers the risks inherent in the Saudi operating environment and concentrations on both sides of the balance sheet.
NCB’s profitability remains strong, due to an increase in core business volumes. However, its net income in 2007 suffered from a drop in stock market-related income and impairments on the securities portfolio. In the first half of 2008, NCB reported a modest increase of 3.7 percent in net income to SR3.7 billion. The main driver of the increase in revenue was net special commission income (up 18 percent) and core banking fees (up 24 percent).
NCB’s asset quality is still adequate, despite an increase in the absolute levels of non-performing loans (NPLs). Large write-offs and strong loan growth in 2007 and in the first half of this year helped to maintain the bank’s asset quality ratios at comfortable levels.
Fitch also affirmed Saudi Electricity Company’s (SEC) long-term issuer default (IDR) and senior unsecured ratings at ‘AA-’ (AA minus).
The outlook for the long-term IDR is stable. SEC is the incumbent vertically integrated electricity utility in the Kingdom.
SEC’s ratings are aligned with the sovereign’s to reflect the government’s strong tangible and intangible support for SEC.
