Thursday, Jun 11, 2015
Dubai: Moody’s Investors Service said on Thursday it has assigned long and short term local and foreign currency deposit ratings of Baa3/Prime-3 to UAE’s Invest Bank for the first time.
The long-term ratings carry a stable outlook, the ratings agency said in a statement.
The ratings reflect the bank’s strong macro profile, along with high profitability and capital buffers, although these strengths are moderated by the bank’s weak and volatile asset quality reflecting very high single borrower and sector concentration risks and very high funding concentration and limited business diversification moderated by low reliance on market funding.
“We also incorporate into our ratings a high likelihood of
support from UAE authorities in case of need,” the ratings agency said, adding “we expect the bank’s asset risk to remain relatively weak and volatile against peers, as we expect the single borrower and sector concentrations to persist, in addition to its legacy exposure.”
The ratings agency said upwards pressure on Invest bank’s ratings could develop through material reduction in concentrations on both sides of the balance sheet; and a significant improvement in the bank’s business diversification.
Upward pressure can also come in if there is a material reduction in the business dependence on key management personnel, Moody’s added.
Downwards pressure could be exerted on Invest bank’s ratings as a result of weakening of profitability and capitalisation metrics or deterioration in liquidity metrics, it added.
Invest Bank’s funding profile exhibits very high depositor concentration, at levels that compare unfavourably to
both global and UAE peers.
“While we recognise the historical stickiness of these deposits, the bank’s deposit base comprises mainly of corporate time deposits which tend to be more price and confidence sensitive than more
granular retail funding,” Moody’s added.
Staff Report
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