Jul 14 2011 |
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Moody's confirms A3/P-2/D+ rtgs of GIB; outlook negative
Lender's franchise strength underpinned by Saudi govt ownershipLIMASSOL, July 14: Moody's Investors Service has today confirmed the following ratings of Gulf International Bank B.S.C. ( GIB ), following the bank's efforts to restore its financial strength and improve its risk positioning:
n A3 long-term foreign-currency deposit ratings
n D+ standalone bank financial strength rating (mapping to Ba1 on the long-term scale)
These ratings now carry a negative outlook. Today's rating announcements conclude the review for downgrade initiated by Moody's on Feb 24, 2011. GIB 's P-2 short-term rating is unaffected by today's rating announcement.
Moody's decision to confirm GIB 's standalone and supported ratings reflects the view that GIB is making sufficient progress to restore its franchise strength and that effective steps have been taken to improve its risk positioning.
The re-orientation of GIB 's regional wholesale lending business towards higher-yielding large and mid-corporate segments, away from less profitable project and syndicated finance, could achieve improved returns over the medium term.
GIB has taken parallel steps to strengthen its risk positioning by reducing leverage (size of the loan book relative to equity) to under 4x, from more than 6x in 2008. The bank has also strengthened its liquidity profile by increasing its proportion of medium-term funding and reducing the average maturity of its loan book.
GIB 's Ba1 standalone rating remains constrained by modest profitability and high corporate loan and deposit concentrations, counterbalanced by strong capitalisation. The bank's moderate franchise strength is underpinned by its Saudi government ownership. This enables the bank to raise stable wholesale funding at a low cost, including longer-term sources, and has also yielded approval to expand the branch network in Saudi Arabia, with the bank planning to launch retail banking operations in 2012.
The bank's A3/Prime-2 foreign-currency deposit ratings incorporate four notches of parental support uplift, based on 97% ownership by Saudi Arabia's Public Investment Fund and Saudi Arabia's strong track record of providing support to the bank.
The negative outlook on GIB 's ratings reflects residual uncertainty about the trend in the bank's credit costs as it reduces its exposure to government-related project finance and expands its lending to medium-sized regional corporates. It also reflects short-to-medium-term risks to profitability should the bank fail to meet its revenue targets on the planned retail banking operation.
Moody's has today also confirmed the following debt ratings with a negative outlook:
n The A3 senior and
Baa1 subordinate ratings of
GIB
's $4,000 million Euro MTN programme
n The Baa1 rating on
GIB
's USD400 million Subordinated Floating Rate Euronotes, due 2015
n The A3 rating on
GIB
's SAR3,500 million Floating Rate Bonds, due 2015, issued by the bank's Saudi branch
n The A3 rating on
GIB
's SAR2,000 million Floating Rate Bonds, due 2015, issued by the bank's Saudi branch
Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.
The principal methodologies used in rating this bank were "Bank Financial Strength Ratings: Global Methodology" (February 2007) and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology" (March 2007).
Headquartered in Manama, Bahrain,
Gulf International Bank
reported total assets of $15.5 billion as at December 2010.
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