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Rating derives strength from the financial health of major sponsors of the bank. Sponsoring shareholder of KTKB is Kuwait Finance House (KFH), the largest bank in Kuwait. In addition to injection of capital in FY10 by sponsors, KFH has also provided subordinated debt to KTKB to the tune of USD 200m. Other shareholders include eminent institutions such as Republic of Turkey General Directorate of Foundations, Kuwait Public Institution for Social Security and Islamic Development Bank.
Established in 1989, Kuveyt Turk Katilim Bankasi (KTKB) operates through a network of 180 branches in Turkey. Among the four participation banks in the country, KTKB's share as of 3QE'11 was about 26%. The bank has a strong customer focus and remains well managed, with a senior team that has remained stable over the years.
In line with the growth in the banking industry, balance sheet footing of the bank has increased on a timeline basis. Financial standing of the bank is sound as reflected in strong capitalization and asset quality indicators. With a capital adequacy ratio significantly above the regulatory requirement, the bank has room for further growth. Business portfolio has remained robust, with net non-performing financings remaining below 1%. Small and Medium Enterprise (SME) segment has been spelled out as the bank's future focus, and while this sector offers considerable opportunities as a rapidly growing section of the economy, and by way of wider spreads; delinquency rates have traditionally been higher in this segment.
Depositor base is diversified, with a high proportion of retail funding. Earnings for the first half of 2011 were comparable to prior year results, while profits fell for the banking sector as a whole, highlighting he bank's relative strength in its market. A strong profitability position is also evidenced in a return on assets of about 1.75% (annualized) for the half year 2011.
Turkish banks were seen to be less impacted by the recent global recession vis-à-vis European banks. Despite increase in risk-weighted assets, capitalization levels remained well above the minimum regulatory requirements. Loan delinquencies of the banking sector have also declined over time. However, banking sector as a whole may experience some weakening in asset quality indicators in 2012, with slowdown expected in the economy.
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For further information on this rating announcement, please contact Ms. Sabeen Saleem or Mr. Nasir Ali Merchant at +973 17211606 or fax at +973 17211605.
© Press Release 2012
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