Fitch affirms NBK rating with stable outlook
Kuwait, June 28, 2011
Fitch Ratings, the international credit rating agency, has affirmed the National Bank of Kuwait’s (NBK) long-term issuer default rating (IDR) at AA- with a stable outlook.
The short-term IDR is affirmed at F1+, support rating at 1 and the support rating floor at AA-. The individual rating is affirmed at B.
Fitch said that NBK’s individual rating reflects the bank’s leading domestic franchise, consistent profitability, sound asset quality, conservative risk profile and low funding costs.
Fitch added that NBK’s IDRs reflect the extremely high probability of support from the government of Kuwait, should it be required, considering NBK’s importance to the Kuwaiti banking system, and the consistent support local banks have received from the authorities during past systemic crises. NBK’s IDRs have a Stable Outlook, reflecting the Kuwaiti sovereign’s ratings.
The rating agency stressed that NBK maintained sound profitability ratios in 2010, with net income 13.6 per cent higher, assisted by a marked reduction in impairment charges, which represented a modest 5.9 per cent of pre-impairment operating profit.
Net income continued to grow in the first quarter of 2011 and the bank is expected to generate sound profits throughout 2011, despite the more difficult conditions in certain Middle East markets.
Fitch highlighted that NBK’s asset quality ratios remain sound, a reflection of the bank’s conservative attitude to credit risk. NBK reported a slight improvement in loan quality ratios during 2010, with non-performing loans at 1.7 per cent of the total and coverage at 209 per cent at end-2010. Past due but not impaired loans continued to fall in 2010.
Fitch added that NBK has a strong and stable deposit base, both retail and corporate, and has benefited from a “flight to safety” during crises. Capitalization improved in 2010, following a rights issue which raised KWD163.5m including share premium.
Equity consists almost entirely of Tier I capital. The Fitch core capital ratio stood at a strong 24.8 per cent at end-2010. The Tier I ratio stood at 18.2 per cent (end-2009: 14.5 per cent).
The rating agency pointed out that NBK is the largest bank in Kuwait, with a market share of around 30 per cent of loans and deposits. It offers retail, private and corporate banking via an extensive domestic network of 71 branches.
It also has an extensive international network in major financial centers worldwide and elsewhere in the Middle East. – TradeArabia News Service