Fitch affirms Saudi Hollandi at 'A-'/'F2'; outlook stable

The Support Rating Floor is affirmed at 'BBB+'.

The Long and Short-term IDRs and Individual rating reflect SHB's corporate franchise, good profitability, conservative approach to risk and the benefits gained from its strategic alliance with ABN Amro N.V (rated 'AA-' (AA minus)/ 'F1+'). These factors are balanced by SHB's relatively small size, modest capitalisation, weaker asset quality and large concentrations in loans and deposits. While there is uncertainty surrounding SHB's future ownership given the acquisition of ABN AMRO by the Royal Bank of Scotland, Fortis and Santander consortium, Fitch does not propose any rating action at this stage until further information is available.

The Support rating reflects the high probability of support from the Saudi Arabian authorities, should the need arise. Fitch considers that support would be forthcoming given SHB's systemic importance and the history of support being provided by the Saudi Arabian Monetary Agency.

SHB has reported good profitability supported by its traditional strengths in corporate banking and treasury. Retail banking and wealth management services are now expanding and should provide further revenue growth as well as a diversification of risks and ultimately increase market share. Asset quality has deteriorated somewhat in recent periods and is a concern; this puts negative pressure on the ratings, particularly as reserve coverage and capital ratios are currently tight. Balance sheet liquidity is comfortable.

SHB is the eighth-largest bank by total assets in Saudi Arabia. The bank has operated in the Kingdom since 1977, though its origins go back to 1926. As such, it is the oldest bank in the Kingdom. It is 40%-owned by ABN Amro and the remaining shares are held by Saudi investors. SHB's principal lines of business are corporate banking, consumer banking, treasury and investment services. Operations are conducted through a network of 41 branches, 140 ATMs and over 3,800 point-of-sale terminals.

A report on this entity will be available shortly on the agency's subscription website, www.fitchresearch.com, under Financial Institutions/Banks/Full Rating Reports.