Saudi National Bank – Ratings Affirmed with a Stable Outlook

(MENAFN- Capital Intelligence Ltd) Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed the Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) of Saudi National Bank (SNB or the Bank) at ‘AA-’ and ‘A1’, respectively. At the same time, CI Ratings has affirmed SNB’s Bank Standalone Rating (BSR) of ‘a-’, Core Financial Strength (CFS) rating of ‘a-’ and Extraordinary Support Level (ESL) of High. The Outlook for the LT FCR and BSR is Stable.

The Bank’s LT FCR is positioned three notches above the BSR, which is the maximum uplift permitted under our criteria when the ESL is assessed as High. This reflects our view that the authorities exhibit a strong willingness to provide timely extraordinary support if needed – particularly given SNB’s 37.2% ownership by the Public Investment Fund. This willingness is underpinned by the sovereign’s very strong capacity to extend such support. Several of the domestic banks in Saudi Arabia, including SNB, are designated as domestically systemically important banks. Saudi banks play a central role in financing the Kingdom’s development agenda, including in financing contractors involved in large-scale infrastructure and economic diversification projects under Vision 2030. Their strategic importance to the functioning and stability of the domestic economy underpins the authorities’ strong incentive to preserve confidence in the financial system. Reflecting this, the government has an established track record of supporting the banking sector and maintains substantial financial capacity to provide assistance should the need arise.

SNB’s BSR is based on a CFS rating of ‘a-’ and an Operating Environment Risk Anchor (OPERA) of ‘bbb’. The OPERA for Saudi Arabia balances the economy’s limited diversification, low monetary policy flexibility and geopolitical risks against strong external buffers and substantial oil reserves. It also takes into account the banking sector’s strong capital buffers and good funding structure, primarily consisting of domestic deposits, despite rising cross-border funding to meet the elevated credit demand associated with Vision 2030 projects. Saudi banks continue to benefit from strong access to capital markets.

The Bank’s CFS rating is supported by very good asset quality, strong credit loss absorption capacity, solid profitability (despite margin pressure), robust capitalisation, and a comfortable liquidity and funding profile. Challenges include broader system-wide pressures stemming from tightening liquidity, which continue to exert upward pressure on funding costs and price competition, which could limit the Bank’s ability to implement its asset repricing strategy. Geopolitical risks remain a factor, as do the Bank’s small but weak international operations.

As the largest domestic bank in terms of assets operating a universal banking model, SNB benefits from significant scale and diversification. The Bank has strategically positioned itself as a key enabler of Saudi Arabia’s Vision 2030, aligning its operations with the country’s national development goals. Furthermore, the Bank is placing a strong emphasis on digital transformation, focusing on enhancing operational efficiency, expanding market reach, and improving customer experience through ongoing investments in technology, automation and cybersecurity.

By September 2025, total assets expanded notably, driven by significant growth in net financing and advances. Wholesale financing was a key driver, particularly the micro, small and medium-sized enterprise portfolio, which accounts for about a quarter of wholesale financing. Retail financing also grew strongly, though headline growth is understated due to the securitisation of a mortgage portfolio earlier in the year. By end-Q3 25, deposits also showed solid growth, with the CASA ratio recovering closer to (albeit still below) historical levels. In 2024, the Bank’s balance sheet growth had underperformed that of the broader banking sector. Price competition mainly for customer deposits, particularly in Q4 24, led to subdued both deposit growth and loan origination. This reflected the strategy of maintaining pricing discipline and prioritising risk-adjusted returns over volume growth.

As of September 2025, SNB’s asset quality remained robust, with a significant improvement in the non-performing financing (NPF) ratio and full loss reserve coverage, comparing favourably to the sector’s already strong averages. Even after including purchased or originated credit impaired (POCI) loans dating back from the merger with SABA, NPFs remain very low and loan-loss reserves continue to provide full coverage (notwithstanding that POCIs are already booked at net impaired fair value), while Stage 2 financing remains low, indicating limited latent credit risk. The Bank’s proactive NPF management strategy – which included accelerated write-offs, enhanced collateral realisation and conservative provisioning – is further supported by the use of digital tools to monitor repayment behaviour. Looking ahead, some upward pressure on corporate NPFs could arise from borrowers linked to public projects if budget adjustments or Vision 2030 project reprioritisation create cash flow pressures, though there is currently no evidence of pressure on asset quality. The quality of SNB’s non-financing assets remains high, with the majority of its investment portfolio consisting of investment-grade securities, including a large portion in Saudi government securities.

SNB’s profitability remains good, underpinned by resilient core income and disciplined cost management, enabling the Bank to outperform its peers despite sector-wide margin pressures. In 9M 25, operating profitability improved despite sustained net financing margin compression, driven by financing growth, which supported net financing income and increased non-financing income (non-FI). Although more volatile trading gains grew at a faster pace, half of non-FI continued to be derived from stable fee and commission income, contributing to overall earnings stability. The Bank’s low cost of risk does not weigh on net performance, and reflects effective risk management practices and a high-quality financing portfolio. While SNB’s overall performance remains strong, price competition for both deposits and financings could pose challenges, potentially limiting the Bank’s ability to execute its planned repricing strategy. Despite this, SNB is expected to continue delivering good financial results, supported by market dominance of deposits and financing.

SNB maintains a good funding profile, supported by its large retail base and deep corporate relationships. With credit growth outpacing deposits under Vision 2030, the Bank has strengthened funding diversification through domestic and international term debt issuance. Reliance on short-term interbank borrowings did not increase. The Bank has considerable funding flexibility. Liquidity risk for SNB is considered low overall, benefiting from solid regulatory buffers and a sizable stock of HQLAs including substantial holdings of Saudi government and other highly rated fixed-income securities.

SNB’s capitalisation remains strong, with regulatory CET1 and total capital ratios of 17.6% and 20.8%, respectively, as at Q3 25. Although the Saudi Central Bank (SAMA) does not disclose bank-specific capital requirements, management’s stated Tier 1 target for 2024-25 suggests that current buffers are sufficient to support balance sheet growth and absorb risk-weighted asset expansion. Looking ahead, SNB – in common with its peers – may need to raise additional capital to accommodate potential adjustments in SAMA’s interest rate risk-weight framework and to comply with the 1% countercyclical capital buffer that will become effective in May 2026; both will need to be met through fresh CET1 capital. Earnings generation continues to support solid internal capital accretion, while the Bank has demonstrated consistent access to domestic and international capital markets through regular AT1 and Tier 2 issuances.

Rating Outlook

The Stable Outlook suggests that the ratings are expected to remain unchanged over the next 12 months. This reflects our assessment that the risk profile of SNB is likely to remain steady.

Rating Dynamics: Upside Scenario

An upgrade over the next 12 months appears unlikely, as the Bank’s BSR is already at a very high level. An upgrade of SNB’s LT FCR would require a concurrent improvement in the Bank’s standalone profile, and an upgrade of the sovereign rating, provided that the latter also translates into upward pressure on the OPERA and maximum ESL uplift is maintained.

Rating Dynamics: Downside Scenarios

On the downside, the Outlook on the Bank’s LT FCR could be revised to Negative, should a similar action be taken on the sovereign’s rating. A downgrade of the Bank’s BSR or CFS would require a marked deterioration in asset quality, capital and/or liquidity metrics; this is not expected over the next 12 months.

Contact

Primary Analyst: Stathis Kyriakides, Senior Credit Analyst; E-mail: ...
Secondary Analyst: Darren Stubing, Senior Credit Analyst; E-mail: ...
Committee Chairperson: Morris Helal, Senior Credit Analyst

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