Disclosure about Credit Rating
Reference to the Capital Markets Authority's Regulations concerning Disclosure of Substantial Information and the mechanism to announce the same, and to Chapter 4, Book (10), Article 4-1-1/18.
We would like to state that Fitch Ratings has re-affirmed Kuwait International Bank’s (KIB) Long-Term Issuer Default Rating (IDR) at 'A+' with a Stable Outlook. According to their report dated 16 October 2017.
Disclosure Form of Credit Ratings
Date: 17 October 2017
Listed Company: Kuwait International Bank
Rating Agency: Fitch Ratings
Ratings for KIB:
Long-term IDR affirmed at 'A+'; Outlook Stable
Short-term IDR affirmed at 'F1'
Viability Rating affirmed at ‘bb-‘.
Support Rating affirmed at '1'
Support Rating Floor affirmed at 'A+'
1. Long–term IDRs at (A+): A High credit quality rating denotes expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating categories.
2. Short –term IDRs at (F1): The Highest short-term credit quality indicates the strongest intrinsic capacity for timely payment of financial commitments.
3. Support Rating (SR) at (1): A bank for which there is an extremely high probability of external support. The potential provider of support is very highly rated in its own right and has a very high propensity to support the bank in question.
4. Support Rating Floor (SRF) at (A+): This rating reflects the agency’s view about the likelihood that the rated entity will receive extraordinary support, in case of need, specifically from government authorities.
5. Viability Rating at (bb-): “bb” ratings denote moderate prospects for ongoing viability. A moderate degree of fundamental financial strength exists, which would have to be eroded before the bank would have to rely on extraordinary support to avoid default. However, the bank has higher vulnerability to adverse changes in business or economic conditions over time. The modifiers '+' or '-' may be appended.
Reflection of Ratings on Company’s Profile: KIB continues to benefit from a fairly stable operating environment in Kuwait despite the economic impact of low oil prices. The bank is exposed to slower economic growth, but Fitch believes that the government's continuing capital spending plans will partially offset such pressures.
Translation of Press Release or Executive Summary:
On 16 October 2017, Fitch Ratings has affirmed Kuwait International Bank’s (KIB) Long-Term Issuer Default Rating (IDR) at 'A+' with a Stable Outlook. Fitch has also affirmed the bank’s Viability Rating (VR) at 'bb-'.
KIB continues to benefit from a fairly stable operating environment in Kuwait despite the economic impact of low oil prices. The bank is exposed to slower economic growth, but Fitch believes that the government's continuing capital spending plans will partially offset such pressures.
Upside for KIB's VR could come from further improvement in the company profile, franchise and risk appetite, in addition to stabilised asset quality metrics. Downside pressure on the VR could arise from weaker asset quality and capitalisation, particularly if Kuwait were to suffer a stress in the real estate sector.
Fitch views KIB’s new and experienced management team as necessary in order to execute the bank’s new strategy set out in 2015.
KIB’s IDRs are support-driven. Its Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch's view that there is an extremely high probability of support being provided by the Kuwaiti authorities to all domestic banks if needed. This is reflected in the SR of '1' and KIB’s SRF of 'A+', in line with Fitch’s actual country Domestic-Systemically Important Bank SRF.
Fitch's expectation of support from the authorities is underpinned by Kuwait's strong ability to provide support to its banks, as reflected by its rating (AA/Stable) and strong willingness to do so irrespective of the banks’ size, franchise, funding structure and the level of government ownership. This view is reinforced by the authorities' track record of support for the domestic banking system in case of need.
The Central Bank of Kuwait operates a strict regime with hands-on monitoring to ensure the viability of the banks, and has acted swiftly in the past to provide support where needed. There is high contagion risk among domestic banks (Kuwait is a relatively small and interconnected market) and we believe this is an added incentive to provide state support to any Kuwaiti bank if needed, in order to maintain market confidence and stability.
KIB’s asset-quality has been volatile. In 2015, asset-quality improved due to the write-off of a large legacy and fully provisioned impaired financing, but also to a more conservative approach to financing and risk appetite of the new management team. Reserve coverage continues to be high (although lower than peers) due to the prudent actions of the Central Bank of Kuwait, requiring the build-up of precautionary general reserves. KIB’s capital and leverage ratios are above peers.
KIB’s IDRs, SR and SRF are sensitive to a change in Fitch's assumptions around the Kuwaiti authorities' propensity or ability to provide timely support to the banking sector or the bank. At present, Fitch do not consider there is much likelihood of any change.