Riyadh: Tassnief has maintained the long-term national scale entity rating of “(BBB-)’’ (Triple B Minus) and a short-term entity rating of “T-4” assigned to Quara Finance Company ('Quara' or 'the Company'). The assigned ratings reflect adequate creditworthiness, thus low credit risk. Risk profile may exhibit moderately high variation with changes in economic / sector conditions.

Rating Rationale: The assigned ratings incorporate a largely sustained profitability profile, superior capitalization and liquidity indicators vis-à-vis peers, and sufficient funding sources to support business growth. Ratings also reflect sound governance & risk management framework, demonstrated sponsor support and implementation of comprehensive policies & procedures. However, the ratings are constrained by increasingly competitive sector dynamics, weak market position, and weakening of reported asset quality indicators in the ongoing year.  Nevertheless, Tassnief considers the overall balance sheet risk to be manageable given sizeable equity base, and a notable portion of non-performing loans are guaranteed by Kafala.

Gross loan portfolio has declined at end-2023 and end-9M2024, as the impact of steady growth in retail portfolio was more than offset by decrease in MSME portfolio. However, retail portfolio has witnessed healthy growth over the last 2 years. Given the sharp increase in disbursement in the retail segment in recent months and trend of upcoming maturities, Tassnief anticipates growth momentum in gross loan portfolio to accelerate. Business diversity is considered satisfactory with low client concentration in both MSME and retail portfolios and adequate geographic diversification in the gross loan portfolio. Asset quality indicators are also expected to improve from levels reported at end-September 2024 with effective controls now in place for the segment that was contributing the most to the rise in infection levels. Going forward, profitability profile will be a function of strong portfolio growth in the high yielding retail segment.

Rating Triggers: Ratings remain dependent on the Company’s ability to successfully execute its business plan, grow its market share while sustaining current profitability, liquidity and capitalization indicators. Improvement in asset quality indicators and reduction in net-NPLs to Tier 1 equity is also important.

About the Company: Quara Finance Company ('Quara' or 'the Company') is a Joint Stock Company registered in the Kingdom of Saudi Arabia under commercial registration number 1010262141 dated February 4, 2009. Quara is actively engaged in providing finance lease, consumer finance, and small and medium enterprise finance services within the KSA. The Company operates from its head office in Riyadh. The financial statements for 2023 have been audited by PWC Certified Public Accountants. The auditors have expressed an unqualified opinion on these statements.

For further information on this rating announcement, please contact Mr. Talha Iqbal email at RS@Tassnief.com.

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