IslamicFinance.de

Fitch Ratings says that 2009 proved to be, as anticipated by Fitch, a challenging year for banks in Saudi Arabia as the full impact of the global economic crisis caught up with the region, reflected in rising loan impairments and a rapid slowdown in lending. The preliminary 2009 results released by the 10 main Saudi commercial banks rated by Fitch showed different trends in net income in 2009, with Q409 being the worst quarter of the year.

Fitch notes that five of the 10 largest commercial banks operating in Saudi Arabia showed improvements in their net income y-o-y, but overall growth in total net income for all 10 banks stagnated in 2009 y-o-y (2008: -14.2%). Areas of concern included lower domestic economic growth, mainly reflecting lower oil revenues and exports, and the negative impact on asset quality of recent rapid credit growth as well as problematic exposures to some large Saudi trading groups (primarily Algosaibi and Saad). The agency has yet to see the full audited financial statements of the Saudi banks but will review them fully in the near future. At this stage, Fitch does not expect to see further downgrades of Individual Ratings in 2010.

Q409 appears to have been the least profitable quarter of the year for all Saudi banks except Riyad Bank ('A+'/'F1'/'B/C'/Stable Outlook). The noticeable drop in performance in Q409 mainly resulted from significant loan impairment charges, which Fitch believes primarily resulted from problematic exposures to the above-mentioned large Saudi trading groups. The higher impairment charges required caused Saudi Investment Bank ('A-'/'F2'/'C/D'/Stable Outlook), Saudi Hollandi Bank ('A-'/'F2'/'C'/Stable Outlook) and Aljazira Bank ('A-'/'F2'/'C/D'/Stable Outlook) to report net losses in Q409.