Manama - Dagong Global Credit Rating Company Limited (Dagong) and Islamic International Rating Agency (IIRA) have jointly reaffirmed the international scale credit rating of Al Baraka Banking Group (ABG) at 'BBB+/A3' (Triple B Plus / A Three). In addition, IIRA has reaffirmed ABG's national scale rating at 'A+(bh)/A2(bh)' (Single A Plus / A Two). Outlook on the assigned ratings is 'Stable'.
IIRA has also reassessed the group's overall fiduciary score in the range of '76-80', which indicates strong fiduciary standards and a well developed governance structure, wherein rights of various stakeholders are well defined and protected. The fiduciary score is an aggregation of scores assigned to its three sub-sections, namely Corporate and Shari'a Governance at '81-85', and '76-80', respectively, and an Asset Manager Quality score at '76-80'.
ABG operates under an Islamic wholesale banking license from the Central Bank of Bahrain (CBB), managing locally incorporated Islamic retail banks in 11 countries i.e. Algeria, Bahrain, Egypt, Jordan, Lebanon, Pakistan, Sudan, South Africa, Syria, Tunisia and Turkey, in addition to an investment company in Saudi Arabia. Macro-economic environment remains challenging in some of the group's core jurisdictions. Nonetheless, gradually improving credit environment in key markets provides strong impetus to the wealth creation ability of the group in the foreseeable future.
Ratings assigned to ABG derive strength from the group's relatively strong wealth creation ability given increasing demand for Islamic banking services and ABG's prominent position in the global Islamic banking segment. Gradual business growth, well managed spreads and optimum operating efficiency levels have contributed to sustained profitability over the years. However, currency depreciation effects have tended to eclipse growth in operating revenues and assets in recent years.
The obligation fulfillment sources available to ABG are sufficient and support its ability to meet its contractual liabilities. The group's assets quality and liquidity indicators are sound and compare favorably to peer Islamic banks, globally. ABG's consolidated capitalization has depicted a decline on a timeline basis; however, the same remains comfortably above the regulatory requirement. External equity injection will allow the group to grow risk assets in tandem with the growth prospects available to it in key markets.
The governance score assigned to ABG benefits from regulatory supervision in Bahrain being superior to regional benchmarks. The subsidiaries of ABG are individually regulated by their local banking supervisors. While no department at any of the subsidiaries has a direct reporting line at the parent level, some key control functions including finance, strategic planning, risk management, internal audit and Shari'a compliance liaise regularly with relevant departments at ABG for consolidation and policy framework standardization.
For further information on this rating announcement, please contact Mr. Raza Lakhani, CFA at raza.lakhani@iirating.com or Ms. Wenyue Zhou at zhouwenyue@dagongcredit.com.
© Press Release 2015
