SABB's IDRs and VR reflect the bank's
consistent profitability, comfortable liquidity and adequate capital
position. The ratings also consider SABB's strong franchise and the
benefits of being an associate bank of HSBC Holding plc. and the
managerial and specialized expertise provided to SABB under a technical
services agreement. The ratings also reflect the concentrations in the
loan book and operating environment.SABB has maintained robust
profitability and consistent net interest margin despite a slowdown in
the domestic credit environment. Impairment charges fell for 2010 and H1
2011. Fitch expects net income to continue to compare well with peers.
Liquidity is healthy, supported by a large pool of liquid assets
comprising cash and balances with Saudi Arabian Monetary Agency (SAMA).
Interbank and investments were equivalent to 37 percent of total assets
at end-2010 or 50 percent of customer deposits; just over half of these
assets had a maturity of less than three months.SABB recorded a
reduction in NPLs at end-2010 and NPLs are appearing to stabilize in
2011. Impairment provisions continued to increase at end-H1 2011 and
more than covered (110.7 percent) impaired loans at end-H1, 2011.The
bank continued to improve its capital position at end-2010 and H1 2011
(Tier 1 11.9 percent) and internal capital generation remains good.Given SABB's franchise, Fitch believes that there is an extremely high probability of support from the SAMA if required.SABB
is the fifth-largest bank in Saudi Arabia with a 9 percent share of
total assets at end-2010 and is 40 percent owned by HSBC BV (a wholly
owned subsidiary of HSBC Holdings PLC).
