Fitch affirms Banque Saudi Fransi at 'A'/'F1'; outlook stable

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The Long- and Short-term IDRs and Individual rating reflect BSF's strong corporate franchise, strategic alliance with Credit Agricole Group (CA; rated 'AA'/'F1+') and healthy financials, including strong profitability, solid asset quality, good cost control and comfortable liquidity and capital ratios. The ratings also consider recent rapid loan growth and the bank's still large concentrations in loans and deposits. The Support rating reflects the high probability of support from the authorities, should the need arise, given BSF's franchise and the history of support being provided by the Saudi Arabian Monetary Agency.

The Support Rating Floor is affirmed at 'BBB+'. The Support Rating Floor indicates the level below which Fitch would not lower BSF's Long-term IDR given the current Saudi Sovereign rating ('A+'/Outlook Positive). Fitch also views there to be a moderate probability of support from BSF's core shareholder, Calyon (rated 'AA'/'F1+'), in case of need.

BSF's 2007 results to date are satisfactory. As expected, brokerage fees were significantly lower in Q107 and H107 following the stock market correction in 2006, but BSF's corporate banking and treasury divisions have delivered very strong core earnings, supporting its bottom line in both periods. 'Looking ahead, BSF should benefit from increasing opportunities in Saudi Arabia, although competition from new entrants in project finance, investment banking and brokerage could prove challenging, as the bank has traditionally been strong in these sectors,' says Mahin Dissanayake, Associate Director in Fitch's Financial Institutions team. 'Therefore, it is positive that BSF is working closer with Credit Agricole in large transactions and diversifying into financial services via several important joint ventures.'

BSF was established in 1977, though its origins date back to 1948. BSF focuses primarily on wholesale corporate banking, but is also expanding its retail banking and investment services. Calyon, a wholly-owned subsidiary of the Credit Agricole Group, holds 31.1% of BSF's shares and provides technical assistance and senior management via a management agreement. The bank's second-largest shareholder is the quasi-governmental Government Organisation for Social Insurance (GOSI) with 12.8%. The remaining shares are held by Saudi investors and nationals.

BSF operates a network of 73 domestic branches plus 12 ladies' branches, 210 ATMs and 4,500 points of sale. Subsidiaries and joint ventures include Fransi Tadawul (100% BSF/brokerage), Sofinco Saudi Fransi (50%/50% BSF and Sofinco Group/consumer finance), CAAM Saudi Fransi (40% Credit Agricole Asset Management/60% BSF/asset management), Calyon Saudi Fransi (55% Calyon/45% BSF/investment banking) and Allianz Saudi Fransi Insurance Company (32.5% BSF and 32.5% Allianz).The bank also has a 27% stake in Banque BEMO Saudi Fransi, Syria.