IIRA Assigns Fiduciary Ratings to United Capital Bank

Manama, March 2, 2016 Islamic International Rating Agency (IIRA) has assigned investment grade national scale ratings of 'BBB(sd)/A3(sd)' (Triple B / A Three) to United Capital Bank (UCB), indicating adequate credit quality. Outlook on the assigned ratings is 'Stable'. Fiduciary score has been assessed in the range of '66-70', which reflects adequate protection of the rights of various

Press Release

March 2, 2016

Manama, March 2, 2016

Islamic International Rating Agency (IIRA) has assigned investment grade national scale ratings of 'BBB(sd)/A3(sd)' (Triple B / A Three) to United Capital Bank (UCB), indicating adequate credit quality. Outlook on the assigned ratings is 'Stable'. Fiduciary score has been assessed in the range of '66-70', which reflects adequate protection of the rights of various stakeholders.

UCB was incorporated in 2006 and operates as an Islamic bank in the Republic of Sudan with a full-fledged banking license, although its operations are geared towards wholesale banking. It has developed expertise in corporate banking and syndication financing, providing banking solutions to corporate institutions. Accordingly, business base features concentration, both on the assets and liabilities side, exposing the bank to higher counterparty risk and risk of sizable calls on liquidity. Sizable liquid asset reserves, nonetheless, support the bank's liquidity position.

UCB, like other Sudanese banks, has also been influenced by the financial and economic challenges facing Sudan, which have increased the systemic risks and reduced asset deployment opportunities. In recent periods, the bank's asset growth has slowed; whereas, impairment ratio has risen on account of classification of a large client, which is an industry-wide exposure and is backed by sub-sovereign sponsors. Sudan's banking sector is also exposed to sudden changes in economic and regulatory policies. Sound capitalization with about a fourth of assets being equity funded lends support to UCB's risk profile. However, the small base moderates the bank's loss absorption capacity.

The bank appears to be in compliance with local applicable corporate and other regulatory requirements. However, there are gaps in the areas of representation of independent directors, board committees and internal controls, among others, when compared to international best practices. Shari'a compliance benefits from regulatory supervision which includes centralized product approvals. Independent reporting of the Shari'a control department to the Shari'a Supervisory Board is recommended.

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For further information on this rating announcement, please contact Mr. M. Raza Lakhani, CFA at raza.lakhani@iirating.com or email to iira@iirating.com.