Capital Intelligence (CI), the international credit rating agency, announced that it has affirmed the ratings of The National Commercial Bank (NCB), based in Jeddah, Saudi Arabia. In view of the Bank's strong liquidity, continued cost control and ongoing improvement in asset quality, the Financial Strength rating is maintained at 'AA-'.

Supported by the same factors, the Long-Term Foreign Currency rating is affirmed at 'AA-' and the Short-Term Foreign Currency rating at 'A1+', both constrained by the sovereign rating. All ratings carry a 'Stable' Outlook.

Due to the Bank's prominent position in the Saudi banking sector and its majority government ownership, official support is expected to be forthcoming in the unlikely event it is needed. Consequently, the Support level remains at '1'.

Having easily recovered from shocks to its investment and loan portfolios in 2008 and 2009, the Bank has spent the past two years in continued improvement in the balance sheet, as well as in the income statement.

Through improved risk management, as well as more aggressive use of write-offs, the non-performing loan (NPL) portfolio and the NPL ratio have declined substantially.

That improvement has allowed the Bank to adjust its loan-loss provisions so as to boost its earnings while still posting one of the sector's best NPL coverage ratios in 2011. A significant caveat in regard to its asset quality, however, is the level of concentration at the very top of its loan book, although this is mitigated by the quality of those borrowers.

NCB continues to post the soundest liquidity ratios among Saudi banks, including a stock of liquid assets larger than its loan book. While that liquidity has hurt its special commission income, the Bank has produced a sound level of operating profit through the exercise of good cost control over the past three years.

NCB was founded as a Jeddah-based money-changing operation in 1938 and became a joint liability partnership under Saudi law in 1951. In 1953, it was granted a banking license and became Saudi Arabia's first locally owned bank.

Current ownership includes two Saudi government entities: The Public Investment Fund and the General Organization for Social Insurance, which hold a combined 79% of the Bank's shares.

As of 31 December 2011, the Bank's assets totaled SAR301.2bn (a market share of about 20%), and its capital totaled SAR34.1bn, making it the kingdom's largest bank by both measurements. At year-end 2011, NCB served almost three million clients through its network of 295 branches (including corporate service centers), over 1,800 ATMs and over 15,000 POS terminals.