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

Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmedIndustrial Bank of Kuwait’s (IBK) Foreign Currency Long-Term and Foreign Currency Short-Termratings 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 hasbeen revised to Negative from Stable due to IBK’s deteriorating loan asset quality and weakenedprofitability. In addition, based on the government’s controlling ownership interest in IBK and the veryhigh 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 largein terms of assets, it plays an important role as Kuwait’s national development bank by providingfinance to key industrial and commercial sectors within the domestic economy. Given recessionaryeconomic conditions in Kuwait last year and soft conditions thus far in 2010, and in common with mostKuwaiti commercial and Islamic banks, the Bank’s loan asset quality has weakened substantially. In2009 this necessitated substantial provisioning charges. These adversely impacted IBK’s ROAA, whichthough improved in Q1 2010, remained strained.IBK was established in 1973 to promote industrial development, primarily in Kuwait, and in the Gulfregion. However, non-Kuwaiti lending remains minimal. The Bank’s main shareholders at end 2009included the Government of Kuwait (31.39%), the Central Bank of Kuwait (12.56%), Wafra InternationalInvestment Company (11.66%) and the Public Institution for Social Security (5.16%). Other significantshareholders 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 ofthe Bank’s shares is held by local industrial and investment companies with individual holdings rangingfrom 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 extendterm loans to the commercial and industrial sectors at both market and preferential rates. The Bankalso provides short-term commercial loans such as working capital facilities to its corporate client base.