(MENAFNEditorial) Capital Intelligence (CI), the international credit rating agency, today announced that it has downgraded the ratings of Tadhamon International Islamic Bank's (TIIB), based in Sana'a, Yemen. TIIB's Financial Strength Rating (FSR) is downgraded to 'B' from 'B+', and the Outlook for the FSR is downgraded to 'Negative'. The Outlook for TIIB's Foreign Currency Ratings – which are affirmed at 'C+' Long-Term and 'C' Short-Term – are downgraded to 'Negative' as is the case with all CI-rated Yemeni banks, reflecting the current turmoil and severe economic weakness. The Support Rating is maintained at '4', reflecting the limited capacity of support.
The rating action reflects the severe deterioration in the country's operating environment and rapidly weakening economic situation, as well as the attendant risk to the Bank's financials. TIIB is the main Islamic financial institution in Yemen, majority owned by the domestic group Hayel Saeed Anam. Although its exposure to Yemen and the government specifically through treasury bills is lower than peer banks, TIIB faces similar challenges. Non-performing loans (NPLs) and assets are also expected to rise, which will require additional provisioning – thereby hitting profitability.
Infighting over control of power in Yemen has significantly escalated. The country's economy is in increasingly dire shape and at risk of completely collapsing. The main conflict is between forces loyal to the beleaguered President, Abdrabbuh Mansour Hadi, and the rebels known as Houthis – who have forced Mr. Hadi to flee the country.
The Houthis, a Zaydi Shiite group from the north of the country, have effectively controlled the capital, Sana'a, since late 2014, and seized the presidential palace and Hadi's private residence along with the headquarters of Yemen's two main intelligence agencies in January 2015. More recently, the group has advanced to Yemen's second biggest city, Aden. Over the past few weeks, fighter jets from a coalition of Sunni Arab militaries have been bombarding military installations across Yemen as part of a Saudi-led campaign to dislodge the Houthis.
In regard to the banking system, the economy may weaken to the extent that the financial sector does not have any hard currency. After seizing control of key ministries, serious concerns exist that the government may be unable to pay salaries in the next two to three months. Yemen needs 84 billion rials (USD390mn) a month for salaries for 1.2 million civil servants and military personnel. Another threat is a reduction in aid from Saudi Arabia, whose donations have helped make up for the decline in oil exports, Yemen's main source of dollars.
Yemen's security forces have split loyalties, with some units backing Mr. Hadi and others the Houthis and Mr. Hadi's predecessor Ali Abdullah Saleh – who has remained politically influential. Mr. Hadi is also supported in the predominantly Sunni south of the country by militia known as Popular Resistance Committees and local tribesmen.
Both President Hadi and the Houthis are opposed by al-Qaeda in the Arabian Peninsula (AQAP), which has staged a number of deadly attacks from its strongholds in the south and south-east. The position is complicated by the emergence in late 2014 of a Yemen affiliate of the jihadist group Islamic State, which seeks to eclipse AQAP and claims it carried out a series of suicide bombings in Sana'a in March 2015.
Recent figures on bank withdrawals are hard to come by in Yemen, but there are signs that cash is rapidly drying up. A recent central bank report stated that Yemen's income from oil exports declined by 37% in 2014 to USD1.67 billion. As well as falling prices, the decline is attributed to frequent attacks on oil pipelines by tribesmen. The exchange rate, held at about 215 rials to the dollar in recent years, is now at risk.
 
TIIB – a Yemeni joint-stock company – was established under the name of Yemen Islamic Bank for Investment and Development in 1995. The Bank converted to Islamic banking and changed its name to TIB in 1996 and at the EGM on 20 March 2002 to the present style. The majority of shares are held by directors, associates and member companies of the Hayel Saeed Anam (HSA) international group of companies, which is the largest corporation in Yemen. Total assets of the Bank stood at YER525 billion (USD2.4 billion) at end 2013.
CREDIT RATINGS
Foreign Currency Financial Strength Support Outlook
LT ST FC FSR
C+ C B 4 Negative Negative
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.