Capital Intelligence affirms Samba Financial Group ratings

The long-term foreign currency rating of AA-, the short-term foreign currency rating of A1 and the financial strength rating of AA- are all unchanged, as is Samba's support rating of 2. All ratings carry a 'Stable' outlook.

Samba is Saudi Arabia's second-largest bank by total assets, with a market share of about 14%, and the fourth-largest by capital.

In the past decade its franchise has expanded beyond the bank's traditional strength in corporate banking to become a major force in the kingdom's consumer banking sector.

The bank's 65-branch network has changed little in recent years, as Samba has attracted business through the expansion of alternative delivery channels.

Samba's balance sheet displays strength in all areas, and in general has weathered the current economic crisis very well. Even by CI's conservative measurement of NPLs, the bank's asset quality remained sound and NPLs were more than completely covered by loan-loss reserves.

Like most banks in Saudi Arabia and elsewhere in the Gulf, Samba is facing write-offs, or at least workouts, relative to several large family-owned corporates.

While full resolution of that issue may still be some time away, CI believes that Samba is well equipped to deal with these possibilities, because of its strong capital position and its robust earnings profile.

As was the case with most Saudi banks, Samba's CAR fell because of growth in the balance sheet and because the kingdom's banks for the first time calculated capital adequacy according to Basel II guidelines. Nevertheless, the bank's capital position remained more than adequate.

Liquidity by all major ratios is very sound, partly a consequence of Samba's historical ability to generate time deposits and to do so with minimal effect on its cost of funds.

The bank's special commission differential is very similar to that of the peer group; that, coupled with continued cost control, allowed the bank to be one of the few in the kingdom to post an increased net profit for 2008.

Samba was established in 1980 as Citibank capitalised its Saudi branches and incorporated them as Saudi American Bank, in which Citibank held a 40% stake. The bank was managed (through a management agreement) by Citibank until 2003, when both the ownership and the management relationships were terminated.

Samba became completely locally owned at that time, and much of the Citi management remained with Samba.