The Saudi Investment 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 the Saudi Investment Bank (SAIB or the Bank) at ‘A’ and ‘A1’, respectively. At the same time, CI Ratings has affirmed SAIB’s Bank Standalone Rating (BSR) of ‘bbb’, Core Financial Strength (CFS) rating of ‘bbb’ 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, and the sovereign’s very strong capacity to extend such support if needed. 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.

SAIB’s BSR is based on a CFS rating of ‘bbb’ 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 a good funding structure, primarily consisting of domestic deposits, although wholesale funding growth – and increasingly cross-border borrowings – is accelerating in order 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, a sound capital position, and a stable – though relatively costlier – funding profile reflecting greater reliance on term deposits than peers. Profitability is satisfactory but remains below the domestic peer average, constrained by structurally lower margins. Key challenges include SAIB’s smaller scale in a market dominated by larger banks and persistent pricing pressure on deposits arising from broader system-wide pressures stemming from tightening liquidity. The latter will continue to exert upward pressure on funding costs while normalising interest rates, could further compress the net interest margin. In addition, the elevated degree of asset encumbrance due to reliance on repo financing – around two-thirds of the Bank’s securities portfolio is encumbered – weakens available liquidity, despite regulatory ratios remaining comfortably above minima. Additional credit challenges are likely concentration in both lending and deposits, as well as geopolitical risks.

SAIB is one of the smaller banks in Saudi Arabia, with an overall satisfactory franchise but limited market share. Given its straightforward and focused business model, it is nevertheless a highly competitive player in its targeted niches of corporate and private banking.

We assess SAIB’s risk profile as satisfactory. Credit metrics continue to strengthen, with the NPL ratio extending its multi-year improvement and reserve coverage remaining high; improved credit quality and strong recoveries have kept risk charges in check. Stage 2 exposures also remain low, suggesting that latent credit risk is low. Looking ahead, government budget adjustments or project reprioritisation could introduce some upward pressure on asset quality (particularly for contractors engaged in public-sector projects), though there is currently no evidence of emerging stress. Non-loan asset quality is also strong, with the majority of the fixed-income portfolio, including a large share of government securities, being of investment-grade quality.

SAIB’s profitability continues to lag the domestic peer group, reflecting structurally lower margins and a comparatively modest contribution from non-interest income. Nevertheless, ROAA of 1.24% as of Q3 25 remains good by international standards. Funding costs eased marginally in 9M 25, supported by diversification measures – including a syndicated loan targeted to Asian markets and which was favourably priced. However, cost of funds remains among the highest in the sector due to continued migration toward term deposits and the Bank’s limited access to low-cost mass retail balances. Despite broadly flat net interest income, operating profit improved modestly, aided by disciplined cost control while net income also benefited from lower provisioning needs. Cost efficiency remains weaker than peers, though still sound, and ongoing cost optimisation efforts are delivering incremental improvements.

SAIB’s funding profile remains anchored by customer deposits, though concentrations are expected to be more pronounced given the Bank’s comparatively smaller branch network and limited access to granular, low-cost mass-retail funding. In response to the ongoing shift of customer deposits toward costlier time deposits (and given tighter system-wide liquidity as strong Vision 2030-related credit demand continues to outpace deposit growth), the Bank has diversified funding sources by successfully tapping international debt markets. Liquidity is supported by a sizeable stock of HQLAs, although a majority is encumbered due to high utilisation of repo funding. Even so, regulatory liquidity ratios remain comfortably above requirements.

SAIB’s capital position is sound, with capital ratios remaining strong despite some moderation in 2025, as internal capital generation lagged the pace of risk-weighted asset growth. Capital quality is high, underpinned by a solid CET1 base. Capital flexibility is also good, supported by satisfactory profitability and demonstrated access to capital markets. As is the case with other Saudi banks, SAIB may need to raise fresh capital in 2026 in light of SAMA’s planned introduction of the countercyclical buffer and higher SAR interest rate risk in the banking book (IRRBB) stress-testing requirements effective 2026.

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 SAIB is likely to remain steady.

Rating Dynamics: Upside Scenario

An upgrade of SAIB’s LT FCR would require a stronger market position, including growth in market share that enhances the Bank’s pricing power, reduces concentrations and supports structurally stronger margins, while capitalisation and asset quality remain at robust levels. Given that SAIB’s current financial profile is already solid, reflected in its high CFS, an upgrade of the BRS would more likely be driven by an improvement in Saudi Arabia’s OPERA assessment, assuming the maximum ESL uplift remains applicable.

Rating Dynamics: Downside Scenario

A downgrade of the Bank’s LT FCR would require a downgrade of its BSR, either stemming from a reduction in the Saudi OPERA assessment or from a more than one-notch downgrade of its CFS due to a material deterioration in asset quality, capitalisation and/or liquidity metrics, which 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
Committee Chairperson: Morris Helal, Senior Credit Analyst
 
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