Riyadh – Mubasher: Moody's Investors Service has affirmed all ratings and assessments of National Commercial Bank (NCB) and Samba Financial Group, including their long-term and short-term deposit ratings at A1/P-1, and Baseline Credit Assessments (BCA) at baa1 and a2, respectively.

The outlook on the long-term deposit ratings for both banks remains negative, according to a press release.

The rating action comes after the two lenders had officially announced that they entered into a binding merger agreement.

The NCB-Samba tie-up will create a regional powerhouse with SAR 837 billion ($223 billion) in assets, uniquely positioned to accelerate the transformation of Saudi Arabia’s banking landscape and deliver progress towards Vision 2030.

NCB

The affirmation of NCB's ratings reflects the agency's expectation that the merger will strengthen NCB's number one position in the market, and increase its resilience against current operating environment pressures.

Moody’s notes, however, that the merger with Samba will not result in a significant shift in NCB's business mix or solvency; given that NCB is about twice the size of Samba.

Moody's predicts the merged bank to maintain sound solvency and funding. NCB's long-term deposit ratings are at the same level as Saudi Arabia's A1 issuer rating and capture the bank's solid Baseline Credit Assessment (BCA) of baa1 and a three-notch uplift based on Moody's expectation of a very high likelihood of government support.

NCB's baa1 BCA reflects the bank's strong funding and liquidity, underpinned by its position as Saudi Arabia's largest bank with a market share close to 19% of total assets as of June 2020. The BCA also reflects the bank's strong solvency.

SAMBA

Moody's affirmation of Samba's ratings highlight Moody's expectations that the bank's operations, standalone profile, and the probability of government support will not likely change until the merger is completed.

Samba's A1 long-term deposit ratings are at the same level as Saudi Arabia's A1 long-term issuer rating and capture the bank's solid Baseline Credit Assessment (BCA) of a2; and a one-notch uplift based on Moody's expectation of a very high likelihood of government support.

Samba's a2 BCA is underpinned by its strong funding and liquidity profile; and strong solvency.

Negative outlooks 

The negative outlooks for the two banks are driven by the likely weakening of the government's capacity to support the Saudi banks as indicated by the negative outlook on the government's A1 long-term issuer rating, the deteriorating operating environment faced by the country's banks due to lower oil prices, the spread of the coronavirus, and reduced government spending.