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Sun 22 Nov 2009 12:45 PM

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The Middle East’s 25 smartest banks-Riyad Bank

The Middle East’s 25 smartest banks-Riyad Bank

In September Fitch Ratings affirmed Saudi Arabia-based Riyad Bank's (RB) Long-term Issuer Default Rating (IDR) at ‘A+' with a Stable Outlook. Simultaneously the agency affirmed RB's Short-term IDR of ‘F1', Individual Rating of ‘B/C', Support Rating of ‘1', and Support Rating Floor of ‘A+'. The agency also affirmed the $500m senior unsecured notes, issued by RB, at ‘A+'.

According to Fitch, RB's Long- and Short-term IDRs and Support Rating reflect the extremely high probability that support would be forthcoming from the Saudi authorities in case of need. The Individual Rating reflects the bank's strong commercial franchise, consistent profitability and good capitalisation. It also reflects the risks inherent in the Saudi operating environment and RB's concentrations in loans and deposits as well as the market risks from the bank's investment portfolio.

RB, a full service bank, is 51.3 percent government/quasi-government-owned and is listed on the Saudi stock market (Tadawul). It is the fourth-largest bank in Saudi Arabia in terms of total assets, with an approximate market share of eleven percent of system assets at end-2008.

And RB continued to be strongly profitable in H1 2009 despite a fifteen percent y-o-y decline in net income. The fifteen percent increase in net special commission income, RB's most important revenue source, was countered by impairments on investments and (to a lesser extent) higher loan impairment charges in the first half of the year.

Fitch expects the downward trend in performance to continue when compared to 2008, particularly given Saudi Arabia's slowing economy and the bank's lower growth in business volumes. Nonetheless, the agency expects RB's strong franchise and large customer base to provide it with enough profits from its core banking businesses to absorb higher impairment charges.

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