International credit rating agency Fitch Ratings has affirmed Gulf International Bank’s (GIB) long-term issuer default rating at “A” with a stable outlook while upgrading the Bank’s Individual rating to “C/D” from “D.” The rating agency has also affirmed GIB's short-term rating at “F1” and subordinated debt obligations at “A-.”
Fitch explained in their press statement that the upgrade of the Individual rating reflected the announcement that shareholders of GIB were acquiring US$ 4.8 billion of non-core investment securities from GIB and the positive impact this will have on the Bank's risk profile, capitalisation and liquidity. Following the sale of the securities, GIB will have no exposure to collateralised debt obligations or asset backed securities.
According to Fitch, the ratings affirmation and upgrade reflect the extremely high probability that the Bank would receive financial support from its shareholders, in case of need. Fitch considers GIB's shareholders' acquisition of the Bank’s non-core investment securities as a demonstration of an extremely strong ability and propensity to support GIB. The agency stated that this acquisition is “an unprecedented support measure in the Middle East in terms of scale.”
Fitch also commented that “with the removal of a significant amount of uncertainty over potential further losses from GIB's investment portfolio, Fitch now considers GIB's market risk profile to be moderate rather than high.” The rating agency added that it considers GIB's capitalisation as adequate, that GIB's liquidity will improve following the transaction, and the asset quality in GIB’s loan book remains strong, with impaired loans below 0.1% of gross loans at the end of 2008.
Commenting on the Fitch announcement, Dr. Yahya A. Alyahya, GIB’s Chief Executive Officer, said: “We are delighted with the ratings affirmation and upgrade by Fitch, which comes at a very difficult and challenging time for the banking industry globally. It is an important independent endorsement of the proactive and conclusive action taken to remove the distraction of the Bank’s non-core international assets, thereby enabling the Bank to focus on its successful and proven GCC focussed business strategy. We consider this positive announcement by Fitch as a vote of confidence in GIB, especially at a time when many banks are being downgraded both globally and in the region.”
Dr. Alyahya added: “These ratings reflect the Bank’s ability to withstand the unprecedented pressures caused by the international financial crisis and its commitment to continue its leading role in the region. We will continue to strengthen our franchise in the GCC states by providing sophisticated, customer-tailored products and services that provide innovative solutions to complex financial requirements.”
GIB is a leading merchant bank in the Middle East with its principal focus on the Gulf Cooperation Council (GCC) states. With a proven track record spanning more than 30 years, GIB provides client-led, innovative financial products and services to a wide customer base in the region, including investment banking, capital markets debt securities, private equity, asset management, project and structured finance and Islamic banking.
