KUWAIT: Fitch Ratings, the international credit rating agency (Fitch), once again affirmed National Bank of Kuwait’s (NBK) Long-Term Issuer Default Rating (IDR) at ‘AA-‘, the highest in the Middle East and North Africa, with a Stable Outlook. Fitch highlighted the strength of NBK’s regulatory capital achieved through a rights issue and by issuing additional tier 1 securities and subordinated bonds, noting that NBK’s regulatory capital ratios and Fitch Core Capital (FCC) have improved.
Moreover, the agency added that NBK’s Viability Rating (VR) is underpinned by its flagship status and dominant franchise, which supports it revenue generation capacity and ability to finance better quality assets than its peers. The rating also factors in the bank’s strong management, consistent strategy and solid funding profile
The report confirmed that the Stable outlook on the bank’s Long-term IDR reflects the outlook on the Kuwaiti sovereign rating at (AA/Stable), due to the agency’s expectation of support from the authorities and Kuwait’s strong ability to provide support to its banks, combined with Fitch’s belief that there would be a strong willingness to do so, in addition to the authorities’ record of support for the domestic banking system in case of need.
Central Bank of Kuwait (CBK) also played a vital role as per the report, with its strict regime and hands-on monitoring approach, leading to the continued improvement of the asset quality in the banking sector. Additionally, reserves for NPLs continue to be extremely high due to the prudent actions of CBK’s requiring the build-up of precautionary general provisions. Finally, in its reflection on the economic scene in Kuwait, Fitch concluded that despite the impact of lower oil prices, Kuwaiti banks in general continue to benefit from a fairly stable operating environment, thanks to the government’s continuing capital spending plans which managed to partially offset the pressures.