Saudi banks will benefit from large lending opportunities provided by a favourable economic outlook to strengthen further their performance in 2014, Fitch said on January 21 . The prospects for Saudi Arabia's economy are strong due to high oil prices, strong government spending on infrastructure projects and an expanding non-oil private sector, the ratings agency underscored. Fitch's outlook on the Saudi banking sector is positive, "while the Rating Outlook on the sector and on all rated banks is Stable." The financial performance of Saudi banks remains sound underpinned by business growth and retreating loan impairment charges, Fitch said. The banks boosted their loan portfolios in the first nine months of 2013 by an annualised 12.4% and Fitch expects credit growth to remain strong in 2014. Asset quality ratios are also generally strong and will likely remain stable due to the benign operating environment, better underwriting standards and new lending directed mainly towards government-related projects, Fitch said. Despite the strong asset growth, the largest Saudi banks remain well-capitalised, with an average Fitch Core Capital ratio of 15% at end- September 13 . A decrease of the sovereign's willingness to provide support for the banking sector will negatively impact all sovereign support-driven Issuer Default Ratings, Fitch noted. Such a scenario, however, is unlikely in the foreseeable future, it added. Banks with sovereign-support driven Issuer Default Ratings include The National Commercial Bank (A+/F1), Al Rajhi Bank (A+/F1), Riyad Bank (A+/F1), SAMBA Financial Group (A+/F1), Bank Aljazira (A-/F2), The Saudi Investment Bank (A-/F2), Saudi Hollandi Bank (A-/F2) and Alinma Bank (A-/F2). The Issuer Default Ratings of Arab National Bank (A/F1), Banque Saudi Fransi (A/F1) and Saudi British Bank (A/F1) are supported by their own credit strength and are mostly sensitive to a weakening of capital ratios or increasing risk in their investment portfolios, according to Fitch.
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