Standard & Poor's Ratings Services has raised its public information local currency counterparty credit rating on Saudi-based The National Commercial Bank (NCB) to BBBpi from BBpi, reflecting the bank's improving financial position, as well as the better transparency resulting from the publication of its audited financial statements for the first time since 1999.
"The rating is supported by NCB's leading commercial position, improving financial profile, and strong liquidity," said Standard & Poor's credit analyst Anouar Hassoune. These factors are somewhat offset by the bank's below-average asset quality and capitalization. With total assets of 106.7 billion Saudi riyals ($28.5 billion) at year-end 2002, NCB is the largest Saudi bank and one of the top banks in the Arab world.
The government of Saudi Arabia, via two government agencies, took control of NCB in 1999, and appointed a new management team. The new team discovered asset-quality problems following an audit of the loan portfolio. An unprecedented one-shot provision was recorded in 1999, generating a loss that seriously affected the bank's capital base.
Management has solved a fair number of problems during the past four years. The bank is still majority owned by government entities, and partial privatization is a possibility. The rating on NCB also reflects the bank's solid market position, which is built on a strong retail franchise and a leading presence in the lucrative Islamic banking business, stated a an agency release.
Even in difficult times, NCB has benefited from strong customer confidence resulting in healthy operating income and enabling the bank to internally restore the capital base that was hard-hit by the vast losses in 1999. Neither asset quality nor capitalization ratios have completely recovered from past problems, however, and remain below average.
"With a clear strategy, NCB should maintain a solid and stable revenue stream, while reining in expenses and recording lower provision charges," added Hassoune. "Consequently, we expect further improvements in NCB's risk profile, making the bank's partial privatization more likely." — (menareport.com)
© 2003 Mena Report (www.menareport.com)
