FitchRatings affirms NBK’s long term rating at AA- with a stable outlook
FitchRatings, the international rating agency, has today affirmed the National Bank of Kuwait’s (NBK) Long-term Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook. Fitch has affirmed NBK’s Short-term IDR at 'F1+', Support Rating at '1' and Support Rating Floor 'AA-'. The Individual Rating has been affirmed at ‘B’.
Fitch Ratings highlighted in its report that NBK’s individual rating reflects the bank’s leading domestic franchise, consistent profitability, sound asset quality, conservative risk profile and low funding costs.
Additionally, the rating agency pointed out that NBK delivered sound profitability ratios in 2009 with net profits reaching USD 925 million, up 4% YoY. The strong net profits were driven by an increase in net interest income along with stable fee income, stronger investment-related gains and lower impairment charges.
Fitch Ratings has made special emphasis on NBK’s asset quality ratios remaining sound as a reflection of the bank’s conservative attitude towards credit risk. In contrast to most peers, NBK reported an improvement in loan quality ratios during 2009.
Commenting on NBK’s 2009 performance, Fitch Ratings added that despite the slower loan growth achieved in 2009 (12% YoY) which was a result of a slowdown in economic activity, deposit growth was stronger at 19% YoY, confirming NBK’s strong and stable deposit base which benefited from “flight to safety” throughout the crisis.
Additionally, and during 2009, NBK built up a 40% stake in Boubyan Bank, one of the smaller Kuwaiti banks with an Islamic banking license. NBK plans to establish a presence in the Islamic banking market and is keen on increasing its stake in Boubyan bank, although this will require approval from the CBK. The rating agency stated that the acquisition of 40% stake in Boubyan Bank has slightly weakened NBK’s capital ratios, but is also likely to strengthen NBK’s domestic franchise in the medium term. Further on capitalization, Fitch confirmed NBK’s strong capital ratios with a satisfactory Tier 1 ratio of 14.5% and a capital adequacy ratio of 15.0% at the end of 2009.
Fitch Ratings also pointed out that NBK has the strongest international presence of any Kuwaiti bank. Although Kuwait remains the bank’s primary market, international operations continue contributing a steadily increasing proportion of revenue. NBK’s international network includes a subsidiary in Egypt, Al Watany Bank, an affiliate bank in Turkey and one in Qatar. The bank also has presence in London, Switzerland, France, Lebanon, Iraq, Dubai, Bahrain, Jordan, Saudi Arabia, Singapore, and the US. It also has representative offices in China and Vietnam.