Moody's Investors Service has changed the outlooks on Gulf International Bank's (GIB) Baa2/P-3 foreign currency deposit ratings to positive from stable. The outlook on GIB's C-Financial Strength Rating (FSR) remains unchanged and stable.
According to Moody's, the positive outlook reflects the gradual success of the bank's strategy that was charted a few years ago, coupled with improvements in the operating environment. As a result of the implementation of the new strategy, GIB's overall risk profile improved as investments in higher grade securities have been favored while the share of high-yield fixed-income securities continues to decline.
The overall quality of the loan portfolio has also improved as the bank reduced its non-relationship international lending and upgraded its credit underwriting procedure. GIB's activities in asset management, corporate finance and advisory services have been picking up in recent times and have been contributing positively to the diversification of earnings, according to Moody’s.
Structural improvements in the Gulf Cooperation Council (GCC), which have lead to various sovereign rating upgrades, have positive implications for GIB, and are a key determinant in Moody's outlook change. Sustained reforms, particularly in Saudi Arabia where the Saudi Arabian Monetary Authority holds 22.2 percent of GIB's shares, are likely to bring in more business for GIB and enhance its overall franchise.
Moody's notes that while financial support would be forthcoming for GIB in the event it were to face financial difficulties, the timeliness of such support is questionable and therefore the imputed support for the bank is limited. However, future improvements in the sovereign ratings of the shareholders, namely the GCC states, may lead to higher ratings for GIB.
GIB is headquartered in Bahrain as an off-shore bank and had total assets of $16.3 billion at the end of September 2003. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
