Fitch Affirms Banque Saudi Fransi AT “A” Outlook Stable

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Fitch Ratings-London-11 June 2012: Fitch Ratings has affirmed Banque Saudi Fransi's (BSF) Long-term Issuer Default Rating (IDR) at 'A' with a Stable Outlook and Short-term IDR at 'F1'. The agency has also affirmed BSF's Viability Rating (VR) at 'a'. A full list of rating actions is at the end of this release.

The affirmation of BSF's ratings reflects the bank's strong corporate franchise, sound financials and risk profile.

As BSF's IDRs are driven by the bank's intrinsic strength, the ratings are sensitive to a significant deterioration of capital ratios, a sharp decline of asset quality, which could be caused by a single exposure due to high concentrations, or a tightening in the liquidity position given significant contractual maturity mismatches. However, these scenarios do not represent Fitch's base case. The extent of a potential downgrade in the Long-Term IDR is limited by the Support Rating Floor of 'A-'.

Fitch's opinion of the extremely high probability of sovereign support is based on the long history of support for banks in Saudi Arabia ('AA-'/Stable/'F1+') and BSF's systemic importance. There is also a moderate probability of support from Credit Agricole S.A. (CA;'A+'/Stable/'F1+') and its wholly-owned subsidiary, Credit Agricole Corporate and Investment Bank (CACIB).

BSF benefits from a technical services agreement with CACIB, under which CACIB transfers a number of key executives to BSF and provides technical expertise and access to the CA group's global network. BSF's strategy remains geographically focused on Saudi Arabia. The bank's business model is based on capitalising on the strength of its long-standing corporate relationships. The bank's non-performing loans ratio remained the best in the sector at end-Q112 at a low 1.2% of gross loans. BSF successfully extended its maturity profile and diversified its funding base by raising a USD750m, five-year Sukuk under its newly established USD2bn Trust Certificate Issuance Programme in Q212. Sukuk issuance is conducted out of BSF Sukuk Limited, a special purpose vehicle wholly owned by BSF. Capitalisation is adequate and supported by moderate dividend pay-out ratios.

BSF's ratings benefit from Fitch's expectation that Saudi Arabia's economic outlook and credit environment will stay favourable. After having expanded by 6.8% in 2011, Fitch forecasts Saudi Arabia's GDP to expand by 4% in 2012 and 3.6% in 2013. The standalone creditworthiness of Saudi banks and BSF in particular also benefits from good business prospects, supported by their franchises being well protected from outside competition. Prospects are good in both the retail and commercial/corporate segments as the Kingdom's population is young and growing and the government has increased its spending, focused on housing, education and infrastructure.

Despite strong competition in the market, Fitch expects the high proportion of unremunerated deposits, which accounted for 50% of total customer deposits at end-2011, to continue to support BSF's interest margin together with an increased focus on higher yielding retail exposures. Profitability is also supported by strong cost efficiency ratios and the significant fall (down more than 50%) in loan impairment charges. Capital levels are comfortable and leave scope to accommodate further loan growth.

The risk profile of Saudi banks also benefits from SAMA's hands-on and conservative regulatory approach, which has limited credit growth through caps on the debt-burden ratio for retail lending and the loan/deposit ratio. Consequently, Fitch considers that this regulatory framework has contributed significantly to maintaining financial stability in Saudi Arabia by e.g. restraining credit growth and preventing asset bubbles as seen in other jurisdictions in the region.

BSF is the fifth-largest bank in Saudi Arabia and is 31.1% owned by CA via its wholly owned subsidiary CACIB.

The rating actions are as follows: BSF: Long-term IDR affirmed at 'A'; Outlook Stable Short-term IDR affirmed at 'F1' Viability Rating affirmed at 'a' Support Rating affirmed at '1' Support Rating Floor affirmed at 'A-' EMTN Programme -senior unsecured notes affirmed at 'A'/'F1'

BSF Sukuk Limited: Trust Certificate Issuance Programme -senior unsecured certificates affirmed at 'A'

Contact:

Primary Analyst Sebastian Angerer Analyst +44 20 3530 1315 Fitch Ratings Limited 30 North Colonnade London E14 5GN

Secondary Analyst Philip Smith Senior Director +44 20 3530 1091

Committee Chairperson Gordon Scott Managing Director +44 20 3530 1075

Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: ; Michelle James, London, Tel: +44 0203 530 1574, Email: .

Additional information is available at www.fitchratings.com.