(MENAFN Press) Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed Commercial Bank of Kuwait's (ComBK) Long and Short-Term Foreign Currency Ratings at 'bbb' and 'a2', respectively, and its Financial Strength Rating (FSR) at 'bbb'. The Outlook for all ratings reverts to 'Stable', from 'Negative', in recognition of the significant improvement in asset quality and liquidity.
The FSR is supported by the much improved asset quality, a strong capital base (no longer significantly impaired by the level of unprovided non-performing loans), a good level of cost control, as well as by the Bank's well established franchise. The FSR remains constrained by weak profitability at the net level because of high risk charges, although profitability is satisfactory at the operating level. Constraining factors are; the continued, somewhat tight, liquidity position; apparent dependence on potentially volatile interbank funding; the challenging, domestic and regional operating environment; and the limited size of the Bank's home market. Significant improvement in liquidity indicators would be required before any upward adjustment to the FSR could be considered. The Support level is maintained at 2, reflecting the government guarantee of customer deposits held with banks, which remains in force, as well as the high likelihood of official financial support, in case of need.
For ratings to rise, ComBK will need to continue the asset quality improvement process, while maintaining its currently satisfactory CAR and adequate liquidity profile. The Bank will also need to restore profitability at the net level “ something which may be difficult unless the Kuwaiti domestic economy sees rather more governmental project spending, than was the case in 2011.
Founded in 1962, members of the country's ruling family maintain a controlling ownership interest in the Bank. With end 2011 total assets of USD 12.9 billion, ComBK is Kuwait's fourth largest, conventional commercial bank, although it remains the bank with the second largest, domestic network (52 branches). Currently, ComBK also controls 19.2% of Boubyan Bank's shares and has a 32% stake in Al Cham Islamic Bank in Syria. However, operations are largely focussed on Kuwait itself “ non-treasury international business is mainly trade finance. Given the recent (but largely resolved) asset quality problems at the Bank, this Kuwait-centric focus is likely to continue over the next few years.
The ratings have been initiated by Capital Intelligence. The issuer did not participate in the rating process. The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents of the issuer for the purpose of the rating, and considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in December 1985. The ratings were last updated in April 2011.
The principal methodology used in determining the ratings is Bank Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com.
