Fitch affirms Saudi British Bank at 'A'/'F1'; Outlook stable

The Support Rating Floor is affirmed at 'A-' (A minus). The Outlook for the Long-term IDR remains stable.

The IDRs and Individual rating reflect SABB's improving profitability, sound asset quality and liquidity ratios and its strong commercial franchise.

Fitch also takes into account the significant benefits derived from the technical services agreement with its core shareholder, HSBC.

The agency believes that the ratings are constrained by SABB's relative size, rapid asset growth and its concentration of business within Saudi Arabia.

Fitch's Support rating reflects the very high probability of support from the Saudi authorities, should it ever be required.

SABB's net profit rose 24% y-o-y to SR1.55bn for H108, with strong results from its core business lines, retail and corporate banking and treasury.

The bank has seen rapid loan growth and benefits from high margins, which support the increase in net interest earnings.

Fee income is recovering and other operating income remains strong. SABB has taken impairments and investment losses relating to its structured credit (SIV and CDO) exposure, which have had limited impact on its results.

Fitch takes comfort from the bank's relatively small exposure to structured credit investments compared to equity and total investments.

Efficiency levels are high, and low loan provision costs ensure that it continues to generate robust operating revenues. Fitch also takes comfort from the bank's funding profile, liquidity position and capital ratios, which compare well against its peers.

SABB was established in 1978 to take over the Saudi Arabian operations of the British Bank of the Middle East (established in Saudi Arabia in 1950). HSBC (through HSBC Holdings BV) holds 40% of SABB's shares.

The bank has access to the resources, expertise and international network of the HSBC Group, and benefits from a technical services agreement which was renewed in 2007 for a further five years.

Products are provided in both Islamic and conventional form, with Islamic products, under the Amanah brand, targeted at both personal and corporate customers. The bank is developing into a financial services group through its joint ventures with HSBC in investment banking (HSBC Saudi Arabia) and insurance (SABB Takaful).