Industrial Bank of Kuwait's Ratings Affirmed; Outlook on FSR is Negative

Industrial Bank of Kuwait's Ratings Affirmed; Outlook on FSR is Negative
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Published August 15th, 2010 - 14:46 GMT

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Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed
Industrial Bank of Kuwait’s (IBK) Foreign Currency Long-Term and Foreign Currency Short-Term
ratings of A and A2 respectively. The Outlook for the Bank’s Foreign Currency ratings remains Stable.
The Bank’s Financial Strength rating has also been affirmed at A, but the Outlook for this rating has
been revised to Negative from Stable due to IBK’s deteriorating loan asset quality and weakened
profitability. In addition, based on the government’s controlling ownership interest in IBK and the very
high likelihood of official financial support in case of need, IBK’s Support rating is affirmed at 2.
IBK has a strong balance sheet in terms of capital adequacy and liquidity. While the Bank is not large
in terms of assets, it plays an important role as Kuwait’s national development bank by providing
finance to key industrial and commercial sectors within the domestic economy. Given recessionary
economic conditions in Kuwait last year and soft conditions thus far in 2010, and in common with most
Kuwaiti commercial and Islamic banks, the Bank’s loan asset quality has weakened substantially. In
2009 this necessitated substantial provisioning charges. These adversely impacted IBK’s ROAA, which
though improved in Q1 2010, remained strained.
IBK was established in 1973 to promote industrial development, primarily in Kuwait, and in the Gulf
region. However, non-Kuwaiti lending remains minimal. The Bank’s main shareholders at end 2009
included the Government of Kuwait (31.39%), the Central Bank of Kuwait (12.56%), Wafra International
Investment Company (11.66%) and the Public Institution for Social Security (5.16%). Other significant
shareholders include Commercial Bank of Kuwait, Al Ahli Bank of Kuwait and Ahli United Bank
(formerly known as Bank of Kuwait and the Middle East) – each with a 4.48% stake. The remainder of
the Bank’s shares is held by local industrial and investment companies with individual holdings ranging
from 0.05% to 4.48%. The Bank is not listed on the Kuwait Stock Exchange (KSE).
IBK receives substantial long-term, concessional funding from the government, which it uses to extend
term loans to the commercial and industrial sectors at both market and preferential rates. The Bank
also provides short-term commercial loans such as working capital facilities to its corporate client base.

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