The international credit rating agency Fitch Ratings has recently affirmed Gulf International Bank's (GIB) Long-Term Issuer Default Rating (IDR) at 'A' and the Viability Rating at 'bbb-'. The Outlook on the Long-Term IDR is Stable.
Fitch explained in a public statement that GIB's ratings "reflect the extremely high probability of support from its majority shareholder, the Saudi government's Public Investment Fund (PIF; 97.2% stake), despite the bank being licensed and based in Bahrain".
The agency added that "GIB's Viability Rating reflects the bank's improved financial metrics, particularly its strong liquidity and capital position".
Fitch highlighted GIB's improved asset quality, stating that "Impaired loans fell to 4% of total loans at end-9M13 (end-2012: 4.5%). Reserve coverage is very strong (end-9M13: 166%) and provides a healthy buffer to withstand moderate shocks. Asset quality trends imply that impairment charges are unlikely to materially rise again in the near term".
Fitch also referred to GIB's "robust capitalisation", commenting that "Fitch views GIB's capitalisation as strong, with a Fitch core capital ratio of 17% at end-9M13. GIB's capital provides a good buffer for balance sheet growth or potential weaker asset quality as it ventures into new products and markets".
With reference to its funding profile, Fitch commented that "GIB has strengthened its funding profile in recent years, including raising stable customer deposits and improving the term structure of wholesale funding. In December 2012, GIB raised USD500m five-year senior unsecured funding under its USD4bn EMTN programme, at competitive pricing".
Commenting on the affirmation of the rating, Dr. Yahya A. Alyahya, GIB's Chief Executive Officer, said: "We are very pleased with the affirmation of GIB's credit ratings by Fitch. This is a clear testimony reflecting the bank's improved asset quality, and strong capital position and funding profile. We also believe that this strength will further improve in the future as we enter the retail banking market in the Kingdom of Saudi Arabia, creating a stable source of funding and diversified earnings for our shareholders".
Dr. Alyahya added: "The affirmation of the Viability Rating also reflects Fitch's assessment of GIB on a standalone basis without shareholder support and reflects GIB's fundamental financial strength and risk profile".