Leading Saudi banks to maintain strong profitability – Moody’s

ALRAJHI
1120 0.31% 63.70 0.20 NCB
1180 -0.62% 48.35 -0.30 SABB
1060 -1.99% 34.40 -0.70

Riyadh – Mubasher: The three largest banks in Saudi Arabia, namely: National Commercial Bank (NCB), Al Rajhi Bank, and Saudi British Bank (SABB), are expected to maintain strong profitability and efficient cost structures, according to a report by Moody's Investors Service.

The three banks have a combined market share of 47% of the Kingdom’s banking assets.

“SABB will be hardest hit because it must also absorb the costs of its merger with smaller peer Alawwal Bank, and NCB will face a similar pressure if its planned merger with Riyad Bank is completed,” said Ashraf Madani, VP-Senior Analyst at Moody's.

“Al Rajhi's retail focus will provide initial protection, but prolonged low rates will take their toll. Nevertheless, sound efficiency and strong capital at all three banks will protect their credit profiles,” he added.

Moody's says that it is making this forecast despite interest margins on lending narrowing due to falling interest rates, as it forecasts fee-based income to stabilise over the coming quarters, with fees from consumer lending and mortgages offset lower trade and foreign-exchange income.

The report noted that NCB has the largest and most stable non-interest income and is expected to maintain its lead.

“SABB's corporate focus delivers the strongest efficiency. Both NCB and Al Rajhi carry the cost of larger branch networks to service their sizeable retail businesses,” the report concluded.

Source: Mubasher Source: {{details.article.source}}