Fitch Ratings London, one of the leading global credit ratings agencies, has reaffirmed Kuwait International Bank’s Long-term Issuer Default Rating (IDR) at 'A+' and affirmed viability rating (VR) at “bb-” with a stable outlook on 30 September 2019.
The stable outlook on KIB’s Long-term IDR reflects the outlook on the Kuwaiti sovereign rating.
According to Fitch, 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 Kuwait government's continuing capital-spending plans will partially offset such pressures.
Fitch's expectation of support from the authorities is underpinned by Kuwait's strong ability to provide support to domestic banks, as reflected by the sovereign 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' record of support for the domestic banking system in case of need.
Fitch added that the Central Bank of Kuwait (CBK) operates a strict regime with hand’s on monitoring to ensure the viability of banks, and has acted swiftly in the past to provide support where needed.
In Fitch’s view, KIB’s Viability Rating (VR) reflects the bank’s small, but growing, domestic franchise, concentrated balance sheet, volatile asset quality, variable profitability and high reliance on wholesale funding.
Fitch emphasized that The VR factors in the bank’s adequate capitalization and well-managed liquidity, as well as a fairly stable operating environment in Kuwait.
In Fitch’s view KIB liquidity risk remained contained.
Fitch also added that the issuance of USD 300 million additional tier 1 capital notes in 2Q19 restored the bank’s tier 1 ratio and CAR to 19.5% and 20.7%, respectively.
Fitch also emphasized that the reserve coverage of impaired financing continues to be high by international standards due to the prudent actions of CBK requiring the build-up of precautionary reserves. Fitch believes this is necessary to mitigate the bank’s significant concentration.
Sheikh Mohamed Al Jarrah Al Sabah, Chairman of KIB said; “This latest rating action is reflective of KIB’s impressive standing, and it serves to highlight the Bank’s strong financial core as well as its growth strategy. This strategy which is currently underway strive to meet the ever-changing needs of our customers, by adopting latest technology and digital solutions that are accessible at any time and any place to truly satisfy our customers.”
Al-Jarrah further added: “The global banking industry must evolve in a way that is compatible for the future and in this effort, KIB made major investments in upgrading IT infrastructure, streamlining systems and processes to provide customers with an enhanced digital experience.
The Chairman concluded by saying: “Within the past year KIB has garnered a number of prestigious local, regional, and international awards further enhancing it’s already impressive collection of industry awards and recognitions. Like ‘Best Islamic Bank in Kuwait’ and Best Islamic Bank in the GCC” awards, as well as the ‘Excellence in Islamic Banking Products and Services’ award from the WUAB and “Best Customer Acquisition in Kuwait” from CPI Financial. Moreover, KIB earned the ‘Best Branding in Kuwait’ from CPI Financial. KIB was also awarded ‘Best Sharia-compliant Bank in MENA’ by Capital Finance International (CFI.co).
Summary of Fitch Rating Actions:
• 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+'