Fitch downgrades Burgan Bank's Long-Term Rating To BBB+
Fitch Ratings has downgraded Kuwait’s Burgan Bank Long-term rating to BBB+ from A-. At the same time, the agency has affirmed the bank's Individual Short-term and Support ratings at C/D, F2 and 2, respectively. The Outlook is Stable, stated a press release.
The downgrade reflects Fitch's concern over the bank's weak core profitability during the last two years, together with its increasing loan loss provisions and rising cost base.
These issues, combined with a failure of internal processes and controls, which resulted in the bank incurring additional provisions, have affected Burgan Bank's competitive position in an over-banked local market.
Although a new management team has taken steps to rectify the situation, it is Fitch's opinion that, given the bank's limited branch network, scale of operations and the competitive nature of the local market, the new team in place will find it extremely challenging to reverse the decline in profitability. This combination of factors has resulted in the bank's performance continuing to lag behind that of its local peers.
Burgan Bank was established in 1977 with the Kuwaiti government as a founding shareholder. In 1997 the government sold its 60 percent stake in the bank, which resulted in KIPCO, a private sector investment company, becoming the largest shareholder in Burgan Bank with a 42 percent stake. As it is the newest Kuwaiti commercial bank, it is one of the smallest with a modest network of 15 branches and 13 percent share of the banking system's deposits. — (menareport.com)
© 2003 Mena Report (www.menareport.com)