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Moody's affirms Saudi National Bank; Samba’s ratings withdrawn on merger

Moody's affirms Saudi National Bank; Samba’s ratings withdrawn on merger
Outlook on the two banks' ratings remained negative
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Riyadh – Mubasher: Moody's Investors Service affirmed the long- and short-term local and foreign currency bank deposit ratings of Saudi National Bank (SNB).

It also affirmed Samba Financial Group at ‘A1/P-1’. The rating agency affirmed the long-term backed senior unsecured MTN program of Samba Funding Limited at ‘(P)A1’ and the backed other short-term debt at ‘(P)P-1’.

This action followed the completion of the merger between the two banks on 1 April 2021.

Outlook on the two banks' ratings remained negative. However, subsequent to the action, Moody's will withdraw the ratings of Samba “given that the entity no longer exists,” according to the rating agency.

Saudi National Bank, formerly known as National Commercial Bank (NCB), remained the surviving entity absorbing all the assets and liabilities of Samba which ceased to exist upon merger.

Moody's said “the merger will not result in an immediate significant improvement in the enlarged group's financial fundamentals and that the benefits of the merger will take some time to be delivered.”

The merger, however, is believed to strengthen Saudi National Bank's position in the local market. Moody's projected that the merged bank would maintain sound solvency and funding which support its current ratings.

The negative outlook meanwhile was driven by the potential weakening of the government's capacity to support the two Saudi banks, besides pressure on the operating environment faced by local banks due to moderate oil prices, the spread of COVID-19, and reduced government spending.

“Given the negative outlook, any upgrade to the SNB's ratings is unlikely in the near future. The outlook on the long-term deposit ratings could be moved back to stable if the sovereign's outlook moves back to stable and Moody's assesses that the risks in the operating environment remain broadly stable,” according to the rating statement.

The Saudi Stock Exchange (Tadawul) has delisted the shares of Samba earlier this week, in reference to the trading suspension of Samba a few days ago.