Strong operating environment and economic diversification fuel Moody’s Saudi Banks ratings upgrade
Moody’s has announced a Saudi banks ratings upgrade for 11 institutions, highlighting a robust operating environment and the government’s growing capacity to offer support. This move aligns with Saudi Arabia’s economic diversification efforts to reduce its reliance on oil.
The affected banks include major players like Saudi National Bank, Al Rajhi Bank, and Riyad Bank, alongside others such as Saudi Awwal Bank, Banque Saudi Fransi, Alinma Bank, and Bank AlBilad. Gulf International Bank – Saudi Arabia and Bank AlJazira also saw upgrades. The outlook for all banks’ long-term deposit ratings, except Al Rajhi Bank, shifted to stable from positive.
Earlier in November, Moody adjusted Saudi Arabia’s government issuer rating to Aa3 from A1, reflecting the Kingdom’s improved financial stability. The agency expects the non-hydrocarbon private sector GDP to grow by 4-5 per cent annually, placing Saudi Arabia among the fastest-growing economies in the Gulf Cooperation Council (GCC). This growth underpins the banks’ improved credit conditions and positions them to support the nation’s diversification efforts.
Embed from Getty ImagesMoody’s highlighted that growing employment and increased workforce participation, especially among women, are expanding demand for banking services. Additionally, the report emphasizes robust credit growth, particularly for borrowers involved in giga-projects, which will sustain asset quality and profitability across the banking system.
For specific institutions, the agency upgraded the Baseline Credit Assessments (BCA) for Saudi National Bank, Saudi Awwal Bank, and Gulf International Bank – Saudi Arabia, affirming the BCAs of the remaining eight banks. It also raised the likelihood of government support from “high” to “very high” for Alinma Bank, Bank AlBilad, the Saudi Investment Bank, and Bank AlJazira, acknowledging the banking sector’s critical role in advancing the Kingdom’s diversification agenda.
Moody’s praised Saudi National Bank, the largest in the GCC, for its diversified balance sheet and strong asset quality. The bank’s nonperforming loans stood at just 1.6 per cent of gross loans as of September. Meanwhile, Al Rajhi Bank’s affirmed BCA reflects its dominant Islamic retail franchise and financial resilience.
This upgrade highlights Saudi Arabia’s ongoing commitment to economic diversification, ensuring its banking sector remains a pillar of stability and growth.
