International credit rating agency Moody's Investors Service has confirmed Gulf International Bank’s (GIB) long term deposit rating of A3, short term deposit rating of P2 and Baa1 subordinated debt rating. The agency has also revised the Bank’s outlook from negative to stable.
Moody's explained in a press release that the confirmation of GIB's financial strength rating “takes into account the Bank's improved capitalisation and significantly de-risked balance sheet, following the transfer of US$ 4.8 billion in securities (mainly asset-backed securities) to shareholders.”
With an improved Basel II total capital adequacy ratio of 17.3 per cent and an all-equity Tier I ratio of 12.5 per cent, “GIB now benefits from a significant capital cushion that could absorb possible loan losses during the slowdown facing borrowers in the Bank's core Gulf Cooperation Council markets,” Moody's noted.
The agency explained that “the stable outlook on the rating reflects Moody's view that the downside risk for GIB with regard to solvency and liquidity is now well contained.”
Dr. Yahya A. Alyahya, GIB’s Chief Executive Officer, commented: “We are delighted with Moody’s confirmation of GIB’s ratings and the stable outlook assigned to the Bank. This follows a rating upgrade by Fitch on 23rd March and reflects confidence in GIB’s ability to manage challenges and respond to market needs.”
GIB has implemented a number of important initiatives designed to strengthen its ability to meet current and future challenges, and protect the interests of its stakeholders. The most important of these was the sale of a significant portion of its non-core international securities portfolio. Following the sale, the Bank had no exposure to collateralized debt obligations or other asset backed securities.
This transaction protects the Bank from any future losses from these securities, materially delevers and de-risks the balance sheet, reduces risk-weighted assets resulting in a significant enhancement of the Bank’s regulatory capital adequacy ratios, and eliminates the funding risks of the assets.
Dr. Alyahya stated that “GIB’s current credit ratings represent a reassuring assessment of the Bank's strong financial position, as reflected in its reduced risk profile, significant provisions, strong capital base and enhanced liquidity and funding position.”
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.
