ABU DHABI: While Fitch Ratings has identified four flagship banks in the Gulf Cooperation Council (GCC) region, located in Abu Dhabi, Qatar, Kuwait, and Oman, the rating noted that no Saudi bank has qualified for this status.
The four banks are First Abu Dhabi Bank (FAB; AA-/Stable/a-), Qatar National Bank (QNB; A+/Stable/bbb+), National Bank of Kuwait (NBK; A+/Stable/a-), and Bank Muscat (BM; BB+/Stable/bb+).
Despite Saudi National Bank’s (SNB; A-/Stable/a-) dominant market position and 37.4 per cent government ownership via the Public Investment Fund (A+/Stable), Fitch does not view any Saudi banks as having sufficiently strong or strategic links with the sovereign to qualify as flagship banks.
What Is a Flagship Bank?
Flagship banks are institutions that play a pivotal role in their country’s financial ecosystem due to their dominant market positions, significant government or ruling family ownership, and close strategic links with the state.
These banks also manage sovereign operational accounts, hold high shares of government deposits or lending, and support key economic and political agendas.
According to Fitch, flagship banks are characterised by:
- Dominant market positions: Typically the largest franchises in their respective countries.
- Strong sovereign ties: Significant ownership by the government or ruling families and strategic importance to the state.
- Systemic importance: A crucial role in their country’s economic diversification and development.
- Stability and creditworthiness: Resilient metrics across economic cycles, supported by sovereign backing.
Although Fitch does not explicitly use the term “flagship bank” in its Bank Rating Criteria, it applies this designation to differentiate banks with significant commercial importance and strategic state connections from others.
Role of flagship banks
Flagship banks enjoy heightened government support due to their systemic importance and strategic links with their respective sovereigns. This includes high exposure to government deposits, lending, and securities, as well as involvement in key state projects and economic diversification efforts.
GCC banking sectors are highly reliant on oil-driven economies, with government-related deposits often accounting for 30 per cent of total deposits. Flagship banks also benefit from best-in-class funding, liquidity, and lending access, ensuring their strong standalone credit profiles.
Why Saudi Arabia falls short
Unlike FAB, QNB, NBK, and Bank Muscat, Saudi Arabia lacks a flagship bank that meets Fitch’s criteria for strategic importance and government links.
While Saudi National Bank (SNB) holds a leading market position, Fitch views its ties to the Saudi sovereign as weaker compared with flagship banks in other GCC countries. This absence highlights a distinct gap in the region’s largest economy.
“Flagship banks in the GCC exhibit very strong sovereign connections, systemic importance, and typically high government or ruling family ownership. These factors underpin their higher standalone creditworthiness and greater sovereign support compared to domestic peers,” said Amin Sakhri, Director at Fitch Ratings.
The presence of flagship banks underscores their critical role in supporting their economies and maintaining financial stability, making Saudi Arabia’s lack of one a notable exception in the GCC.
