Capital Intelligence (CI) has upgraded the long-term foreign currency rating of Alliance Housing Bank to BBB-, from BB+, in view of the bank’s growing maturity and sustained good performance last year.
The support rating has been raised to 3, from 4, to reflect the rising ownership of state-owned entities in the bank’s capital. The short-term foreign currency rating was affirmed at A3 and the financial strength rating was maintained at BBB-. The outlook was changed to “stable” from “positive”, reported a press release.
AHB is one of only two specialist housing banks in Oman. The bank was set up in 1997 as Oman’s first private sector housing bank and has performed well since inception. Its professional management, strong capitalization and very good asset quality are its major strengths, while its small balance sheet and its dependence on wholesale funding are negative factors influencing its ratings.
The bank has a good business model and its policies are conservative. It operates in a market where the demand for its products is expected to remain high for a very long time. Its asset quality is sound and its lending risks are well defined and easily controllable. While the rapid expansion of balance sheet assets is pushing down the capitalization ratio, the capital base is likely to be more than sufficient for the next several years.
The bank’s strong net interest earnings and moderate cost base underpin its good profitability. AHB is currently dependent on wholesale funds, since retail deposits are difficult to build through a small network. However, funding sources are being diversified and liquid assets are maintained at a high level to meet contractual liabilities and contingencies. — (menareport.com)
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