Manama, January 12, 2015
Islamic International Rating Agency (IIRA
) has reaffirmed ratings of Bahrain Islamic Bank (BIsB
or 'the bank') at BBB/A2 (Triple B)/(A Two) on the national scale and BBB-/A3 (Triple B Minus)/(A Three) on the international scale. Outlook on the ratings is 'Stable'. IIRA has also reassessed BIsB
's fiduciary score at '65-70'. The fiduciary score captures the role of the management of the institution as Mudarib, the entity's governance practices and compliance with Shari'a principles adopted by the bank.
Recapitalization related plans are on the anvil, though these have not been formalized as yet, and will have significant bearing on the potential direction of ratings. In case of further delays in plans regarding recapitalization, ratings may come under stress. For the time being however, ratings have been supported by the change in shareholding that places major Bahraini financial institutions as key sponsors, and by the turnaround posted in operating profitability in 2013, having continued in 2014 and arresting erosion in equity.
There has been gradual improvement in the bank's funding access, reflected in an increasingly cost effective deposit base. The bank had taken significant provisions over the last few years and particularly in 2012 which contributed to a healthier balance sheet. This was also manifest in improved earning capacity, with gradual business growth in the last two years. Meanwhile, the bank has maintained strong control on operating expenses, which is beginning to reflect in overall profitability. However, prior year losses have depleted equity levels and recapitalization is required not only to financially reinforce the bank, but also to benefit from a growing market and expand business operations.
Being the year of major transition in the bank, the year 2013 witnessed complete reconstitution of the Board of Directors. The interplay of recently formed relationships amongst new sponsors and the new board vis-à-vis the bank's management will be monitored as these evolve. The bank's Shari'a Supervisory Board comprises prominent Shari'a scholars that have been associated with the bank for over 15 years. An Executive Committee of the SSB has also been instituted to ensure greater on ground involvement of Shari'a experts.