TEXT-Fitch affirms National Commercial Bank at 'A+';outlook stable

Reuters Middle East

(The following statement was released by the rating agency)

Dec 03 - Fitch Ratings has affirmed Saudi Arabia's National

Commercial Bank's (NCB) Long-term Issuer Default Rating (IDR) at 'A+' and

Viability Rating at 'a'. The Outlook on the Long-term IDR is Stable. A full list

of rating actions is at the end of this rating action commentary.

RATING DRIVERS AND SENSITIVITIES: IDRs, Support Rating and Support Rating Floor

NCB's Long- and Short-term IDRs, Support Rating and Support Rating Floor reflect

Fitch's view that there would be an extremely high probability of support from

the Saudi authorities, if required. This is based on the bank's systemic

importance, the government's majority shareholding and the strong history of

support for local banks from the Saudi authorities.

The ratings would be sensitive to a reduced perceived ability from the sovereign

to support, such as through a sovereign downgrade. The ratings could also be

sensitive to a change in the Saudi authorities' perceived willingness to

support, a reduction in NCB's leading franchise or a reduced government



The bank's Viability Rating (VR) reflects its leading domestic franchise, strong

capital, liquidity and profitability. Negative pressure on the VR could occur if

there was deterioration in the domestic operating environment and in the bank's

asset quality, particularly as a result of rapid loan growth, including in

Turkey, or if there were a sharp reduction in capital or liquidity levels.

Upward movement is unlikely considering the already high level of the VR and in

view of the high concentration to a number of large corporate borrowers.

NCB reported higher net income mainly due to higher fee income from banking

services in 9M12. There has been a strong improvement in operating return on

average assets and return on average equity in 9M12. This was contained by

strong competition and the low interest rate environment, which put pressure on

margins. The cost/income ratio has improved demonstrating solid cost

containment, and is at a satisfactory level. Fitch expects profitability to

continue to improve for full-year 2012 and into 2013 due to the expected high

loan growth and the higher proportion of non-interest income.

Fitch expects asset quality to continue to stabilise in the medium term,

benefiting from the positive effect on the economy from increased government

spending. However NCB's high loan book concentration and fast loan growth, in

particular in its Turkish subsidiary, could be a potential risk for the bank's

asset quality.

The Fitch Core Capital ratio stood at a high 16.0% at end-9M12, providing NCB

with a sound capital buffer. However the capital ratio is decreasing due to

strong asset growth.

NCB's large investments in highly rated government and corporate securities

enable it to comfortably manage liquidity risk. The bank's large customer

deposit base is contractually short term, but it is very stable on a behavioural

basis. Moreover, a large portion of customer deposits are non-special commission

bearing deposits, which benefits the bank's cost of funds.

NCB is the largest bank in Saudi Arabia and one of the largest in the Gulf

Cooperation Council (GCC) region. It is majority owned by the state, with the

Public Investment Fund (69.3%) and the General Organisation for Social Insurance

(10%) as the main shareholders, with the rest privately held.

The rating actions are as follows:

Long-term IDR affirmed at 'A+', Outlook Stable

Short-term IDR affirmed at 'F1'

Viability Rating affirmed at 'a'

Support Rating affirmed at '1'

Support Rating Floor affirmed at 'A+'

EMTN Programme affirmed at 'A+'/ 'F1'

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