GLOBAL: Standard & Poor’s Ratings Services has claimed that one-third of its ratings on Gulf banks — including Islamic banks —have a negative outlook. However, the outlook for most of the banks in Saudi Arabia and Qatar remains stable, it said in a report, “The Economic Slowdown Reveals a Growing Divergence in Credit Quality among Gulf Banks”.

The report pointed out that lower business volumes, asset quality deterioration and subsequent provisioning needs as well as pressure on liquidity were the culprits that led to the differing degrees of the credit rating between Gulf banks.

It also said that the Dubai government’s announcement of the restructuring of Dubai World last November, including a requested standstill on all loans to it and real estate subsidiary Nakheel, had aggravated the problems faced by banks based in the Middle East.

GFH tumbles six notches

BAHRAIN: Standard & Poor’s Rating Services (S&P) has downgraded Gulf Finance House’s (GFH) long-term credit rating to ‘CC’ from ‘B+’, while stressing that GFH’s liquidity position was “under immediate and severe stress”. GFH was at the time of the rating assessment trying to refinance its US$300 million financing facility. “The negative outlook reflects our view of GFH’s weak financial status due to the bank’s inability to put in place effective measures to strengthen liquidity,” said S&P credit analyst Goeksenin Karagoez.

S&P dropped

UAE: Dubai Holding Commercial Operations Group (DHCOG) has removed Standard and Poor’s (S&P) as its rating agency after the latter downgraded it from BB+ to B on a materially weaker cash flow generation and a lack of information on potential ongoing government support.
In response to the downgrade, the conglomerate issued a statement that it had “dropped S&P as its rating agency due to its lack of understanding of DHCOG’s business, its operations and relationship with the Dubai government. Although DHCOG has been engaging with S&P and sharing adequate information on a frequent basis and in a transparent manner, S&P has issued inaccurate statements coupled with factual errors that are misleading.
Therefore, DHCOG discredits and disagrees with the content of the S&P report dated the 25th January,” it stated.

Concrete standing

MALAYSIA: RAM Ratings Services (RAM) has assigned respective long- and short-term ratings of ‘AA2’ and ‘P1’ to Lafarge Malayan Cement’s (LMC) proposed RM350 million (US$102 million) Islamic Securities Program (2010/2017). RAM has also assigned the long-term rating with a stable outlook.

The rating is attributed to LMC’s position as Malaysia’s largest integrated cement manufacturer with access to international markets and a favorable corporate lineage as part of the larger international Lafarge Group, allowing LMC access to its parent’s international distribution networks and global expertise.

RAM earlier upgraded the long-term rating of LMC’s RM350 million Al-Murabahah Commercial Papers/Medium-Term Notes (2003/2010) (CP/MTN), from ‘A1’ to ‘AA2’ with a stable outlook.

The short-term rating of the CP/MTN has also been reaffirmed at ‘P1’. The rating upgrade is attributed to LMC’s resilient and consistently improving financial performance, sturdy balance sheet and robust debt coverage.

Parent factor

INDONESIA: Fitch Ratings (Fitch) has upgraded Bank Syariah Mandiri’s (BSM) national long-term rating to ‘AA-(idn)’ from ‘A+(idn)’ and its Sukuk to ‘A+(idn)’ from ‘A(idn)’. It has also affirmed BSM’s outlook as stable.

The rating upgrades are largely driven by support from its parent bank, state-owned Bank Mandiri (‘BB+’/’AA+ (idn)’), and also its satisfactory financial performance. Based on Fitch’s assessment, the bank’s commitment is reflected in the sole ownership and the financial and technical assistance provided in the development of BSM’s Shariah banking operations.

Downgrade for Murabahah notes

MALAYSIA: Malaysian Rating Corporation (MARC) has downgraded the short-term and long-term ratings of Kwantas SPV’s Murabahah Commercial Paper/Medium Term Notes program to ‘MARC-2ID(cg)’/’A-ID(cg)’ from ‘MARC-1 ID(cg)’/‘A+ID(cg)’, with a negative outlook.

The downgrades took into account the apparent deterioration of parent company Kwantas Corporation’s credit standing as the guarantor of the program. Kwantas SPV was formed to own and lease properties for the benefit of Islamic securities investors. MARC however affirmed the ratings of Kwantas SPV’s RM80 million (US$23 million) Class A, RM15 million (US$4.4 million) Class B and RM60 million (US$18 million) Class C Sukuk Ijarah at ‘AAAID’, ‘AAAID’ and ‘A+ID’ respectively, with a stable outlook. This was premised on the satisfactory performance of the securitized plantation assets.

Weaker portfolio

KUWAIT: Standard & Poor’s Ratings Services (S&P) has assigned Kuwait Projects Company (Holding)’s (KIPCO) long-term and short-term corporate credit ratings at ‘BBB+’ and ‘A-2’ respectively. It has also placed the company on CreditWatch with negative implications.

The ratings are attributed to the liquidity of KIPCO’s investment portfolio which has weakened as the proportion of unlisted assets in the portfolio has increased, while the company’s credit quality is increasingly dependent on the standalone credit profile of its consolidated core holdings. In addition, the risk profiles of KIPCO’s two largest holdings, investment bank United Gulf Bank (UGB) and Pay-TV platform Showtime-Orbit, are relatively high. UGB is an investment-based bank which is involved in Islamic investment banking.

Ratings upgrade

PAKISTAN: JCR-VIS Credit Rating Company has upgraded the “high management quality” of UBL Fund Managers to ‘AM2’ from‘AM2-’. This is due to the company’s efforts in strengthening its organizational structure, in particular the research function, which in turn provides support to investment management.

The rating is also due to the strong performance of the equity funds managed by the company — United Composite Islamic Fund and United Stock Advantage Fund — which invest in international markets. UBL Fund Managers is a wholly owned subsidiary of United Bank which is involved in Islamic banking.

NBB stands strong

BAHRAIN: Fitch Ratings has affirmed National Bank of Bahrain’s (NBB) long-term foreign currency issuer default rating (IDR) at ‘A’ with a stable outlook.

It also affirmed NBB’s short-term foreign currency IDR at ‘F1’, individual rating at ‘B/C’, Support Rating at ‘1’ and support rating floor at ‘A’. NBB’s IDRs and support rating reflect Fitch’s view that there would be a high probability of support from Bahraini authorities. This is because of the bank’s status in the domestic market, the government’s direct ownership and the authority’s ability and strong propensity to maintain confidence in a relatively small banking system. Fitch also affirmed the Bank of Bahrain and Kuwait’s (BBK) individual rating of ‘C/D’ and removed it from Rating Watch Negative.

It affirmed the bank’s long-term issuer default rating (IDR) at ‘A-’ with a stable outlook, short-term IDR at ‘F2’, support rating at ‘1’ and support rating floor at ‘A-’. Fitch said this reflects BBK’s domestic franchise and adequate capitalization. It also reflects rising loan impairment charges, as well as BBK’s reliance on a small and increasingly competitive domestic market. Capinnova Investment Bank is the Islamic investment unit of BBK.