RAM Ratings has assigned a final rating of AA3(s)/Stable to the proposed Islamic MTN Programme of RM2.0 billion (the proposed sukuk) to be issued by Kuveyt Türk Katilim Bankasi AS' (the Bank) funding conduit, KT Kira Sertifikalari Varlik Kiralama AS. Kuveyt Türk is the obligor of the proposed sukuk via a purchase undertaking; the issue rating thus reflects the Bank's credit strength.
Kuveyt Türk is the largest Islamic bank in Turkey, with an asset base of TRY30 billion (approximately RM46 billion) as at end-June 2014. The ratings incorporate a high likelihood of extraordinary support from the Bank's major shareholder, Kuwait Finance House KSC (KFH), which owns a 62%-stake. As the second-largest bank in Kuwait as well as its biggest Islamic bank, KFH is a systemically important entity in Kuwait.
Kuveyt Türk is considered strategically important to KFH. The Bank is KFH's largest subsidiary, and contributed more than 40% of its parent's consolidated pre-tax profit in fiscal 2013. KFH has a well-established track record of supporting Kuveyt Türk, including participation in all of the Bank's equity raising exercises, subscription of its tier-2 capital and the provision of inter-bank funding.
About 65% of Kuveyt Türk's well-diversified customer deposits stem from individuals. While Kuveyt Türk's financing-to-deposit ratio of 93% as at end-June 2014 is relatively high, it is still well below the Turkish industry average of more than 110%. In addition, the Bank has a strong liquidity profile, with a Basel III liquidity coverage ratio of more than 100%.
Kuveyt Türk's gross impaired-financing ratio has been kept below 3.0% for the last 3 years, standing at 2.6% as at end-June 2014. Given its rapid financing expansion (CAGR of 36% between 2009 and 2013), the Bank's financing portfolio is relatively unseasoned. This, together with the Bank's large exposure to SMEs, means that the challenging macroeconomic backdrop in Turkey could affect its asset quality. However, its impairment charges are expected to be comfortably absorbed by its broad margins. In 1H fiscal 2014, Kuveyt Türk recoded a credit-cost ratio of 0.7% while its net financing margin came up to 4%. The Bank's capitalisation is sound, with a Basel III common-equity tier-1 capital ratio of 13% as at end-June 2014.
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Lim Yu Cheng
(603) 7628 1188
yucheng@ram.com.my
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