Gulf International Bank B.S.C. Receives Ratings Affirmation from Capital Intelligence

Gulf International Bank B.S.C. announced that Capital Intelligence Ratings (“CI”) has affirmed its Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) at ‘A+’ and ‘A1’, respectively. The Outlook for the LT FCR was also affirmed as Stable. At the same time, CI Ratings has affirmed GIB’s Standalone Rating (BSR) of ‘bbb-’, with a Stable Outlook, Core Financial Strength (CFS) rating of ‘bbb-’, and Extraordinary Support Level (ESL) of Very High.

The Bank’s LT FCR is set five notches above the BSR to reflect the very high likelihood of extraordinary support from the Kingdom of Saudi Arabia (KSA, ‘A+’/‘A1’/Positive) in case of need. This is based on the Public Investment Fund’s (PIF) – the KSA sovereign wealth fund (SWF) – 97% ownership of GIB, and the Saudi government’s strong capacity, willingness and consistent track record of providing capital and funding support to the Bank.

Furthermore, according to CI, the Bank’s FCRs are not capped by Bahrain’s sovereign credit ratings (‘B+’/‘B’/Stable) or by CI’s assessment of Bahrain sovereign interference risk (Moderate – implying a foreign currency limit of ‘BB-’ for domestic/onshore banks). This is partially because the majority of GIB’s assets, liabilities and earnings are derived from Saudi Arabia, followed by UK and US (Bahrain assets represented less than 5% of total) while Bahraini regulatory restrictions limit GIB’s links to the domestic economy.

According to report, GIB’s BSR is derived from a CFS rating of ‘bbb-’ and an Operating Environment Risk Anchor (OPERA) of ‘bbb-’, which is higher than the OPERA of Bahrain (‘b+’) due to the Bank’s substantial exposure to assets (including self-funding subsidiaries) in highly rated countries notably KSA. OPERA is at a level indicative of modest risk. The OPERA balances the Saudi economy’s limited diversification, low monetary flexibility and geopolitical risks, against strong fiscal and external buffers, and substantial oil reserves. It also takes into account the Saudi banking sector’s strong capital buffers and a healthy funding structure, which primarily consists of domestic customer deposits with little dependence on cross-border funding.
 

CI also underscored GIB’s conservative management and its pursuit of a prudent credit and investment policy, which according to the ratings agency is clearly evidenced by consistently strong liquidity that is underpinned by customer deposits and term borrowings including access to debt capital markets, a well-capitalised balance sheet, good quality and stable capital, a geographically diversified asset base and sound loan asset quality, as well as improving profitability.