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Fitch Raises Saudi Aramco’s Outlook to Stable

Fitch Raises Saudi Aramco’s Outlook to Stable

Wednesday, 28 July, 2021 - 07:45
The Fitch Ratings logo is seen at their offices at Canary Wharf financial district in London, Britain, March 3, 2016. REUTERS/Reinhard Krause

Fitch Ratings announced that it has revised Saudi Arabian Oil Company’s (Saudi Aramco) Outlook to Stable from Negative while affirming the company's Long-Term Issuer Default Rating (IDR) at ‘A’.

In a report on Tuesday, Fitch said the revision of the outlook on Saudi Aramco’s IDR was driven by a similar action on the sovereign.

“The company’s IDR is constrained at that of its majority shareholder Saudi Arabia (A/Stable), given close links between the company and the sovereign,” the statement said, adding that Saudi Aramco’s Standalone Credit Profile (SCP) was assessed at ‘aa+’.

Saudi Aramco – the world’s largest oil producer – enjoys a financial profile that benefits from strong pre-dividend free cash flow generation (FCF) and recently increased but still conservative leverage, Fitch Ratings underlined.

It added that Saudi Aramco’s business profile was characterized by “large scale production, vast reserves, low output costs and expansion into downstream and petrochemicals.”

Meanwhile, the agency said that it has revised six Saudi banks’ Outlooks to Stable from Negative and affirmed the Foreign Currency and Local Currency Long-Term Issuer Default Ratings (IDRs) at ‘BBB+’.

The banks include the Arab National Bank (ANB), Banque Saudi Fransi (BSF), Alinma bank (Alinma), Saudi Investment Bank (SAIB), Bank Aljazira (BAJ) and Gulf International Bank - Saudi Arabia (GIB SA).

“Fitch’s assessment considers the authorities' strong ability to support the banking system, given large, albeit reduced from their historical levels, external reserves. It also reflects a long record of support for Saudi banks, irrespective of their size, franchise, funding structure and level of government ownership,” the agency said in a statement.

Fitch expected that the reserves of the Saudi Central Bank (SAMA) would increase to reach USD 470 billion in 2022-2023.

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