Fitch affirms BSF's IDRs at 'BBB+'

Fitch Ratings affirmed Banque Saudi Fransi's (BSF) Long-Term Issuer Default Rating (IDR) at 'BBB+' with a Negative Outlook. Fitch downgraded BSF's Viability Rating (VR) to 'bbb' from 'bbb+' and removed it from Rating Watch Negative (RWN).

BSF's 'BBB+' Long-Term IDR is driven by potential sovereign support. The Negative Outlook on the Long-Term IDR reflects that on the sovereign.

The downgrade of BSF's VR reflects the rating agency’s view that its financial metrics are more prone to deterioration than larger peers due to a smaller exposure to lower-risk retail assets, providing it with lower protection against a weakening operating environment.

It also represents Fitch's reassessment of the bank's credit profile against domestic and regional peers considering the challenging economic environment.

“We expect the recovery in business activity to support the bank's internal capital generation and maintain capital ratios at sound levels, although a significant deterioration in asset quality could undermine this,” Fitch added.

Fitch placed all 10 Saudi banks' VRs on RWN in March 2020 to signal heightened risks of a severe deterioration in the domestic operating environment following the sharp fall in oil prices and pressures from the coronavirus-related economic disruptions.