Al Rajhi Bank

[Editor's note: A typo in the downside scenario of the Outlook section has been corrected.] The stable outlook reflects ARB's strong retail franchise and its ample capitalization against tighter liquidity conditions in the market, which could slow lending momentum and profitability growth. We could downgrade ARB over the next 24 months if the bank's capitalization deteriorates because of higher-than-expected growth or dividend payouts, or if asset quality deteriorates coupled with a downgrade of the sovereign. An upgrade appears unlikely in the next 24 months. That said, we could raise our ratings on ARB if its RAC ratio sustainably exceeds 15% without a major deterioration in asset quality. We could also raise the rating if we take a similar action on

...S&P Global Ratings expects Al Rajhi Bank's (ARB) bottom line growth will slow in 2023, before rebounding in 2024-2025, thereby bolstering the bank's capital base. In 2023, we expect credit growth to slow to the mid-high single digit range, primarily because of a decrease in mortgage opportunities, higher interest rates, and tighter liquidity conditions. Higher interest rates will also exert additional pressure on margins, particularly considering that 75% of the bank's loan book is mostly fixed-rate retail lending. Furthermore, we anticipate continued migration to interest-bearing deposits will lead to higher funding costs. However, we expect the bank to sustain robust internal capital generation as...

Full Report