KUWAIT: Fitch Ratings, one of the leading global credit ratings agencies, has affirmed Kuwait International Bank (KIB)’s Long-term Issuer Default Rating (IDR) at ‘A+’ and viability rating (VR) at “bb-“, with a stable outlook. This stable outlook on KIB’s long-term IDR reflects the outlook on the Kuwaiti sovereign rating. In its report issued on 22 December 2020, Fitch stated that KIB’s Issuer Default Ratings (IDRs) reflect an extremely high probability of support from the Kuwaiti authorities, if needed.
This considers Kuwait’s strong ability to provide support to domestic banks, as reflected by its sovereign rating (AA/Stable) and strong willingness to do so irrespective of the banks’ size, franchise, funding structure and the level of government ownership. Fitch also added that key rating drivers include stable funding, nominal domestic franchise, higher risk appetite, asset quality and profitability under pressure, adequate but declining capitalization.
Fitch stated that the bank’s fast growth and the implementation of Basel 3 have reduced capitalization levels and buffers over minimum requirements but capital ratios continue to compare well with peers. KIB successfully issued a $300 million perpetual Tier 1 sukuk in June 2019 and a $300 million Tier 2 sukuk in November 2020 to boost its total capital adequacy ratio and fund its growth.
Fitch mentioned that the Central Bank of Kuwait operates a strict regime with good oversight, sound supervision and active monitoring ensuring compliance with prudential limits. These include Basel III capital, leverage and liquidity requirements, as well as financing caps and best practice corporate governance requirements. According to Fitch, a stronger franchise and better profitability, lower financing growth and concentrations, as well as a record of stable asset quality would be positive for the VR.
Commenting about the ratings, Sheikh Mohamed Jarrah Al-Sabah, Chairman of KIB, said: “This recently released credit rating reflects KIB’s distinctive position and highlights our strong financial position, as well as our sound growth and investment strategy. This rating is also in line with Fitch’s report on the Tier 2 Sukuk final “A-” rating – Fitch has also assigned final A+’/’F1′ long- and short-term ratings, respectively, to the program, which will apply only to senior unsecured certificates to be issued under the under the umbrella of this issuance program.”
Al-Jarrah stressed that these distinct ratings help KIB achieve its strategic objectives. “In addition to consolidating its position as a leading Islamic Bank over the long term, Fitch’s ratings help boost the trust of our customers and shareholders and enhance the Bank’s reputation in the market, which unlocks many growth opportunities in the near future,” he said.
Raed Jawad Bukhamseen, Vice Chairman and CEO of KIB, said: “The reality is that the global banking industry must evolve in a way that is compatible with the future. From our side, we are committed to stay ahead of the curve and keeping up with the rapid pace of change in our industry, which is why we made major investments in upgrading our IT infrastructure, streamlining systems and processes, and restructuring our operational model to provide customers with an enhanced digital experience. We believe that this will eventually contribute towards expanding our customer-base, thereby promoting the Bank’s long-term growth and stability.”
Bukhamseen further added: “We have always been proud of our success and notable industry track record, in addition to having garnered numerous regional and international awards. For example, in 2020, we were honored to be recognized as the “Fastest Growing Islamic Bank MENA” and the “Best Shari’a Complaint Bank MENA” by CFI.co, for the fourth and fifth years respectively. We are also proud to have recently picked up the “Most Secure Bank in Kuwait” Award and the “Best Islamic Bank” Award from World Finance, the latter being an award we have now received for the seventh consecutive time.”