Bank Aljazira and Saudi Investment Bank's (SAIB) received a clean bill of health from Fitch Ratings after their issuer default ratings were affirmed and were also given an stable outlook early in the week. The ratings agency affirmed SAIB's Long-term Issuer Default (IDR) ‘A-' (A minus) with Stable Outlook, Short-term IDR ‘F2', Individual ‘B/C', Support ‘1' and Support Rating Floor ‘A-' (A minus). Fitch Ratings has also affirmed Aljazira's ratings at Long-term Issuer Default (IDR) ‘A-' (A minus) with Stable Outlook, Short-term IDR ‘F2', Individual ‘C', Support ‘1' and Support Rating Floor ‘A-' (A minus). The IDRs and Support rating reflect the extremely high probability of support from the Saudi Arabian authorities, if needed. SAIB's individual rating reflects the bank's reasonable franchise, diversification strategy, and good asset quality ratios and liquidity, but also takes into account the bank's small market share, rapid recent loan growth, large concentrations in loans and deposits, and lower capital ratios under Basel II, Fitch said. SAIB remains in discussions with Bahrain-based Albaraka Banking Group (ABG) about a possible merger. ABG is an Islamic bank and has 240 branches in 12 countries across the MENA region and is primarily engaged in retail and corporate banking with total assets of $10.1 billion as of end-2007. SAIB's asset quality ratios remain good, with 1 percent of the loan book deemed impaired at end-H108 and reserve coverage of 244 percent. However, loan growth to date in 2008 has been rapid. The loan book remains fairly concentrated by borrower and with a particular emphasis on share and real estate financing for high net worth customers. Consumer lending remains a smaller proportion of the portfolio than the average for the sector. The Fitch eligible capital ratio of 13.7 percent is just adequate. SAIB is the ninth-largest Saudi bank, mainly active in corporate banking. The bank has entered into a number of joint ventures to diversify assets and revenues. Its largest shareholder is the Saudi government, via the General Organization for Social Insurance with 21.5 percent and a state pension fund with 17.1 percent. The IDRs and Support rating for Bank Aljazira on the other hand reflects the extremely high probability of support from the Saudi Arabian authorities, if needed, Fitch's said. Its Individual rating reflects sound capitalization, solid liquidity and good asset quality ratios. It also takes into account Bank Aljazira's relative size and franchise, and concentrations in the loan portfolio and deposit base. The bank's asset quality ratios remained good, reflecting the continuation of a favorable domestic economic environment. Concentrations exist within corporate lending by exposure and sector although the overall portfolio is increasingly diversified as BAJ builds its franchise. The bank has no exposure to US subprime investments, SIVs, CDOs or hedge funds. Capital ratios remain among the highest in the bank's peer group. Bank Aljazira's capital ratio under Basel II was 15.8, above its target of 15 percent. It is active in corporate lending, trade finance and share brokerage. In recent years, Aljazira has increasingly focused on Islamic banking, offering a number of innovative products to its customers. The bank's activities became fully Shariah-compliant at the start of 2007. __
