Fitch Ratings has affirmed on Tuesday National Commercial Bank's (NCB) Long-term Issuer Default Rating (IDR) at ‘A+' with a Stable Outlook. Fitch has simultaneously affirmed NCB's Short-term IDR at ‘F1', Individual Rating at ‘B/C' and Support Rating at ‘1'. The Support Rating Floor is affirmed at ‘A+'. The agency has also affirmed the USD700m senior unsecured notes, issued by NCB, at ‘A+'. NCB's Long- and Short-term IDRs and Support Rating reflect the extremely high probability of support from the Saudi authorities, should it be required. The Individual Rating reflects the bank's leading domestic franchise, comfortable liquidity position and satisfactory capitalization. It also considers the risks arising from the bank's lending and investment portfolios and borrower concentrations. The bank's profitability improved in Q109 after a challenging Q408 when NCB had to absorb large impairments on its investments. Fitch expects NCB to be profitable in 2009 despite lower growth in business volumes, higher loan impairment charges and additional impairments on the investment portfolio if financial markets do not improve. Asset quality ratios are reasonable to date and compare well regionally and internationally. NPLs were 2.6 percent of gross loans and 1.3x covered at end-Q109. Fitch nonetheless expects asset quality ratios to deteriorate as loans season and the Saudi economy slows. Borrower concentration is also a concern as a few problematic exposures could result in a significant decline in asset quality. Market risks mainly arise from the bank's large investment portfolio. Liquidity is comfortable as NCB benefits from large stable customer deposits and a significant portfolio of liquid securities in addition to the authorities' support to the banking system. Capitalization is satisfactory and of a good quality (almost entirely tier one). The Fitch eligible capital ratio stood at a healthy 16 percent at end-Q109, providing a comfortable buffer for potential asset quality problems.
