Saudi Aramco assigned Aaa.sa rating by Moody's reflecting the company's strength

The ratings agency also assigned ratings to four of the kingdom's banks

An image of Riyadh at night. Moody's has assigned national scale ratings to Saudi Aramco, Saudi Re and four lenders in the kingdom. Reuters

Moody's Investors Service issued an Aaa.sa long-term issuer national scale rating to Saudi Aramco and assigned an NSR to four banks in Saudi Arabia, reflecting their creditworthiness within the kingdom.

Saudi Aramco benefits from an “exceptional operational scale, significant downstream integration and strong financial flexibility given its low cost structure and low leverage relative to cash flows”, Moody’s said in a statement late on Wednesday. “This provides resilience through oil price cycles.”

Aramco's A1 long-term issuer global scale rating (GSR) remains unchanged. The newly assigned NSR to the world’s biggest oil producing company reflects its “position as the strongest rated corporate in Saudi Arabia and one whose credit profile is very closely interlinked with the credit quality of the government”, according to Moody’s.

NSRs provide relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs, though, are not globally comparable with the full universe of rated entities, according to Moody’s.

The lenders assigned NSRs include Saudi British Bank (Sabb), Bank Al-Jazira, Riyad Bank and Samba Financial Group.

The rating action on long- and short-term deposit ratings as well as counterparty risk ratings (CRRs) of the four Saudi Arabian lenders follow a new NSR map by Moody's for the government of Saudi Arabia.

The ratings agency assigned Aa1.sa/SA-1 national scale deposit ratings and Aa1.sa/SA-1 national scale CRRs to Sabb. The Aa1.sa is the second highest NSR that can be achieved by any entity in Saudi Arabia and the highest currently assigned to a lender in the kingdom, Moody’s said.

The bank’s deposit rating reflects its “funding and sound liquidity, solid profitability and efficiency as well as strong capitalisation”, Moody’s said. “These strengths are moderated [however,] by pressures on the bank's solvency in the next two years on the back of lower oil prices, reduced government spending and the coronavirus-induced disruption.”

Moody’s assigned A3.sa/SA-2 national scale deposit ratings and A2.sa/SA-1 national scale CRRs to Bank Al-Jazira. Its deposit rating reflects the bank's small but growing Islamic banking franchise, improved capitalisation and sound liquidity and funding.

The ratings agency assigned Aa2.sa/SA-1 national scale deposit ratings and Aa1.sa/SA-1 national scale CRRs to Riyad Bank, underpinning its strong capital base, stable deposit-based funding and resilient profitability, it said.

Samba received Aa1.sa/SA-1 national scale deposit ratings and Aa1.sa/SA-1 national scale CRRs. Its deposit ratings capture solid funding and liquidity and its strong solvency, with high capital buffers.

Separately, Saudi Re for Cooperative Reinsurance, or Saudi Re, as the company is known, received an A1.sa national scale insurance financial strength rating from Moody’s on Wednesday. The new rating underpins the company's strong brand and market position within the kingdom and its growing presence in its target markets such as Asia and Africa

Its strong asset quality, capital adequacy, strong financial flexibility with non-existent leverage and good access to capital markets in Saudi Arabia also support the rating action, Moody’s said.