Samba's profitability to remain solid: Moody’s

Saudi Arabia’s third-largest bank Samba Financial Group's profitability is expected to remain solid and support its overall credit profile, noted Moody’s Investors Service on Monday, adding that Samba's ratings carry a stable outlook, in line with the stable outlook on Saudi Arabia's A1 rating.

Noting that the bank's deposit ratings are currently on par with Saudi Arabia's A1 stable sovereign rating and, as such, there is limited upside potential for the bank's ratings.

Strong capitalisation and resilient profitability; solid funding and liquidity, supported by a well-established local deposit franchise; and very high probability of government support, underpinned by the bank's deposit ratings, remain the three credit strengths of the bank, Moody’s noted.

However, it added, “Samba's ratings carry a stable outlook, in line with the stable outlook on Saudi Arabia's A1 rating. The outlook also reflects the bank's strong solvency and liquidity, which provide resilience against still elevated asset risks as some borrowers remain vulnerable.”

“Samba's robust liquidity profile positions it to withstand short-term deposit volatility. We expect the bank to retain a strong liquidity position, with liquid assets representing 39.9 percent of tangible banking assets as of June 2018 (above the 35.4 percent average for similarly rated global peers) and the Basel III liquidity coverage ratio at a strong 263 percent as of June 2018,” Moody’s report noted.

Net loans/customer deposits remained flat at 69 percent as of June 2018 (2017: 70 percent), which is well below the system average of around 78 percent and provides the bank with scope to further expand its loan book before it reaches the regulatory maximum loans to deposit ratio of 90 percent, it added.