Standard & Poor's Ratings Services (S&P) has recently affirmed Gulf International Bank's (GIB) long-term and short-term counterparty credit ratings at BBB+ and A-2 respectively.
The agency has also affirmed the ratings outlook as stable.
Yahya A. Alyahya, GIB's chief executive officer, said: "We are very pleased with the ratings affirmation by S&P, and we view it as an endorsement of the actions taken by the bank and its shareholders to address the challenges created by the changes in the operating environment for financial institutions."
He emphasized that "GIB's strong ownership structure, its exceptionally strong capitalization and efficiency, and improved liquidity levels have led to the ratings affirmation, which also reflect the bank's commitment to continue to strengthen its franchise in the GCC."
S&P said in its report that the ratings on GIB reflect its "very strong" capital and earnings, and "strong" liquidity.
The rating criteria also took into consideration the Bank's "adequate" risk position and "moderate" business position.
The agency explained that its assessment of GIB's capital and earnings as "very strong" reflects the Bank's very robust capitalization.
S&P commented that GIB's risk-adjusted capital ratio before adjustments is expected to stay above 15 percent in the next 18 to 24 months.
GIB's "strong" liquidity is another mitigating factor, S&P stated.
S&P noted that "on June 30, 2011, a high 38 percent of its assets were in the form of cash and short-term bank placements."
Moreover, S&P considered "GIB's risk position to be "adequate," taking into consideration its more granular loan book compared with peers', as well as the generally lower-risk profile of its borrowers.... GIB's limited exposure compared with peers' to the riskier real estate and construction sectors is well secured by good quality collateral and conservative provisioning."
The agency also said GIB "is implementing a new business plan involving the start-up of a retail bank across the Gulf but initially operating in Saudi Arabia. This is important for GIB's business model because it provides comfort to counterparties dealing with GIB."
Finally, S&P explained that GIB's Stable outlook "balances our opinion of the Bank's strong capitalization and shareholder support.... The outlook also factors in our expectation that GIB will likely maintain its asset quality and liquidity ratios at the current adequate levels."
© Arab News 2012
