Fitch Ratings has upgraded the Long-term foreign currency rating for Jordan’s Housing Bank for Trade and Finance to BB from BB-, while affirming the Short-term rating at B. The Outlook on Housing Bank remains Stable, stated a press release.
At the same time, Fitch has assigned the bank an Individual rating of C/D and a Support of 3. The rating action reflects the better prospects relating to the sovereign following the reduced political risks associated to Iraq and the improved economy.
Underpinning Housing Bank's ratings are a good domestic franchise, as Jordan's second largest bank, supporting a stable funding base as well as its fairly strong capitalization. However, notwithstanding recent improvements, they also reflect an often challenging operating environment, where regional political tensions affect Jordan's un-diversified economy, which in turn have affected the country's banking sectors performance and asset quality.
Housing Bank, a full service commercial bank, is seeking to expand its retail franchise. Operating efficiencies have improved, lifting core profitability, which is considered adequate. Future growth is directed towards diversifying income by expanding retail banking activites, investment banking and other fee-based services.
The difficult operating environment means loan quality is considered a source of weakness, with gross non-performing loan at 15.8 percent of loans at end-2002. This is however better than the sector average. Total loan loss reserve coverage of gross NPLs is 67 percent and, while collateral exists, the outlook for credit risk is expected to remain challenging, and as a consequence Fitch expects provisioning requirements to remain high. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
