Capital Intelligence (CI) has announced that it has affirmed the Financial Strength Rating (FSR) of
High non-performing loans (NPLs), customer concentrations in loans and deposits and a continuing elevated level of credit risk in an otherwise improving operating environment are constraining factors. The Foreign Currency (FC) ratings are maintained at 'BBB' Long-Term and 'A3' Short-Term. The FC ratings are underpinned by the support of the federal government and the Bank's moderately good financials overall. The Support Rating is maintained at '3', indicating a high likelihood of support from the government in case of need. A 'Stable' Outlook is assigned to all the ratings.
IB is a corporate banking institution and one of the smallest banks in the
The Bank's NPL ratio rose last year due to the continuing problems faced by some corporate borrowers. However, provisions and capital substantially cover NPLs and the Bank's strong profitability adds a further buffer. The Bank has a low level of renegotiated loans and almost two-thirds of its net loans have remaining maturities of less than a year. The loan portfolio is spread over a large number of sectors, but concentration levels are rising in the construction sector, which has grown substantially in recent years. IB's customer concentration is also high owing to sizeable exposures to the government. The Bank's overall customer profile is unchanged – small and medium-sized business entities operating in the principal non-oil sectors of the country continue to be its mainstay.
The Bank maintained its capital adequacy ratio at a solid level at end 2013, although the ratio declined from the previous year-end owing to the repayment of subordinated debt to the
The Bank has a large customer deposit base, which has been growing at a good pace, and its interbank liabilities are very low. IB continues to have money market lines from local and foreign banks, which have been used very sparingly so far. Its large capital base also provides substantial funding support. The Bank has low maturity gaps reflecting the high level of short-term loans on its balance sheet.
IB's net loans to customer deposits ratio had continued to improve in 2013 and its net loans to stable funds ratio was at a good level despite tightening slightly owing to the repayment of subordinated debt. The slow growth of customer deposits over Q1 2014 led to a tightening of all loan-based liquidity ratios at the end of the quarter; but these are still at acceptable levels. Liquid and quasi-liquid assets are at satisfactory levels.
The Bank's wide interest spreads, good non-interest income base and low operating costs underpin its strong operating profitability and ROAA. However, both ratios fell in 2013 owing to a narrower net interest margin and higher provisioning expenses. Nevertheless, the Bank's ratios, which have been consistently strong for many years, remained much higher than the peer group average.
IB was incorporated in the emirate of
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