Monday 18 June 2018

BisB rating outlook stable

Manama , February 11, 2009

Moody's Investors Service has assigned Baa1 long-term and Prime-2 short-term local and foreign currency issuer ratings to Bahrain Islamic Bank (BisB).

It also assigned a D+ bank financial strength rating (BFSR) to the bank. The rating outlook is stable.

This is the first time Moody's has assigned ratings to an Islamic bank in Bahrain, said an official.

"Moody's ratings for BisB recognise the rapid catch-up process the bank underwent from 2004 to 2007, recording a high compounded annual growth rate in assets of 37 per cent," Moody's lead analyst Anouar Hassoune said.

BisB had previously leveraged its strong brand and sound reputation to only a limited degree, but during the last two years it implemented major organisational changes and a committed hiring programme that resulted in senior, experienced officers joining the bank in recent years," he said.

In 2005, Kuwait-based The Investment Dar (TID) acquired 40pc of the bank's shares.

Given the current uncertainty with regard to whether TID will remain BisB's reference shareholder, Moody's ratings for the bank do not factor any support from its Kuwaiti parent.

Moody's notes that, more recently, BisB has positioned itself with a new brand identity and unveiled its new logo, while simultaneously increasing its capital through a rights issue to existing shareholders, which brought BD84.9 million ($222 million) of fresh capital.

By year-end 2007, BisB's equity base had more than doubled from end-2006.

The D+ BFSR - which maps to a baseline credit assessment of Ba1 under Moody's joint default analysis methodology - reflects BisB's growing franchise as Bahrain's leading Islamic commercial bank, strong financial metrics across the board, good asset quality, strong capitalisation and ample liquidity.

The rating is, however, constrained by single-name, sector, business and geographic concentration risks, rapid credit growth in the recent past and the foreseeable future, some degree of investment risks, as well as a still imbalanced funding continuum heavily reliant on short-term customer deposits, which gives rise to both maturity mismatches and displaced commercial risks.

The BFSR is also constrained by the bank's very recent turnaround as a more dynamic institution, its small absolute size, and its lack of diversification, which should be viewed in the context of the still developing nature of the bank's enterprise risk management architecture.

"The D+ BFSR also captures the restrictions that Islamic banks face in managing their liquidity, growing competition in the domestic, regional and international Sharia-compliant banking markets, as well as the reputation risks to which Islamic banks tend to be subject.

"Moody's recognises that BisB has demonstrated its capacity to weather the current financial stress, especially by maintaining ample asset liquidity cushions," Hassoune said.

Moody's expects that BisB's net intermediation spreads, which remain very high, will continue to decline as the bank expands its credit leverage and gradually replaces direct investments with lending exposures.

However, profitability, which reached stellar levels in recent years, is unlikely to suffer from such a shift in asset composition, given that its still robust credit growth and increased entrenchment in the lucrative retail segment should support its future earning streams, in Moody's view.

An upgrade of the bank's BFSR and/or issuer rating is possible in the event of significant asset and business expansion that leads to further operating diversification, improvements in the granularity of the financing and investment portfolios, and a further strengthening of the bank's franchise.-TradeArabia News Service

Tags: Bahrain Islamic Bank | stable outlook |

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