Capital Intelligence (CI) has affirmed the ratings of
Ratings are constrained by the bank's relatively low capital adequacy ratio (CAR), last year's high estimated non-performing loan (NPL) net accretion rate, and the relatively low ROAA. For the same reasons, the Long-Term Foreign Currency Rating is affirmed at 'A+' and the Short-Term Foreign Currency Rating at 'A1'. All ratings continue to carry a 'Stable' Outlook. Because of the systemic importance of the bank, the likelihood of official support is considered to be very high; moreover, support from its major shareholders would probably be forthcoming in the unlikely event it is needed. Consequently, the Support Level remains at '2.'
ANB continued to improve its asset quality last year, as it reduced its stock of NPLs and lowered its NPL ratio. While asset quality was generally stronger, it still bears watching in light of the high estimated rate of NPL net accretion last year. Nevertheless, the bank continued to display the sector's highest level of coverage by loan-loss reserves and a very high effective NPL coverage ratio.
The latter ratio – the sector's second-best – was principally the result of the low stock of NPLs, remaining strong despite the fact that the bank's capital ratios were only about average compared to the well-capitalised peer group. The bank's CAR improved in 2013 and again in Q1 2014, but continued to be low in comparison to other Saudi banks. There was little change in ANB's liquidity profile last year, which remains characterised by sound loan-based ratios, an about average liquid asset ratio, and levels of loan and deposit concentration which are comparable to those seen at other Saudi banks. Customer deposits – especially demand deposits – have consistently exhibited strong rates of growth in recent years.
ANB continues to lag other Saudi banks in respect of its operating profit. Although that line item showed an improvement last year – the result of strong growth in non-special commission income and modest growth in operating expenses – the rise in operating profitability was subdued because of the increase in the size of the balance sheet. An increased risk expense had a dampening effect on the rise in net profit, while the larger balance sheet resulted in a reduction in what was already one of the sector's lowest ROAAs.
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