Capital Intelligence, the international emerging markets credit rating agency, announced that it had upgraded the foreign currency long-term and financial strength ratings of Bank of Sharjah (BOS) to BBB+, from BBB. The foreign currency short-term rating was raised to A2 from A3. The outlook for all the ratings is ‘stable’.
The ratings upgrade was underpinned by the bank’s enhanced capital and strong business growth. The bank’s good management, strong capitalisation, sound asset quality and robust interest and non-interest earnings were the principal positive factors influencing the ratings, while its relatively limited range of activities, the concentrations in the customer deposit base and the lack of diversification on the liabilities side of the balance sheet are the major constraining factors.
Capital Intelligence also announced that it had assigned a BBB+ rating to the bank’s AED500mn unsubordinated two-year convertible bond issue of March 2006, with a stable outlook. The convertible bond should provide the bank with an opportunity to raise additional capital two years from now.as the conversion price on maturity is attractive given the current stock price. Bondholders will be able to trade the bonds once they are listed.
BOS is ranked among the smaller local banks in the country in terms of balance sheet size (USD1.56 billion at end 2005). However, it is poised to grow substantially.
It certainly now has the capital to support a near tripling of its asset base. BOS is primarily a corporate banking institution with limited retail banking activities. Its future strategies focus on further strengthening its strong corporate banking position, developing private, investment and Islamic banking businesses, and diversifying its business base by exploring investment opportunities in the Arab world. The bank also intends to build its retail banking franchise gradually over the coming years.