Four Saudi banks' outlook downgraded to negative by Fitch

Fitch Ratings has downgraded outlook of four Saudi banks from stable to negative in line with the kingdom’s rating which was lowered recently by the ratings agency.

Among the banks affected by the downgrade are Al Rajhi Bank (ARB), National Commercial Bank (NCB), Riyad Bank (RB) and Samba Financial Group.

The rating actions follow Fitch's revision of the outlook on the Saudi Arabian sovereign to negative.

The revision of the banks' outlooks to negative reflects that their Long-term Issuer Default Ratings (IDR) are at the Support Rating Floor (SRF) for Saudi domestic systemically important banks (D-SIB) of 'A+'.

This would be revised down to 'A' in the event of a one-notch downgrade of the Saudi sovereign. The other Saudi banks' Long-term IDRs are not at the D-SIB SRF of 'A+', although we believe there is extremely high likelihood of support for all Saudi banks, and therefore would not be downgraded if the sovereign was downgraded by one notch.

“The willingness of the Saudi sovereign to support the banks is unchanged and is demonstrated by the authorities' strong track record of support for local banks. However the negative outlook on the sovereign reflects its weakening ability to support the banks due to the significant deterioration in its fiscal position,” Fitch analysts said in a statement.

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