Fitch affirms National Bank of Kuwait’s AA- rating with stable outlook
By ARAB NEWS
Published: Jun 28, 2011
JEDDAH: Fitch Ratings, the international credit rating agency, affirmed the National Bank of Kuwait’s (NBK) Long-term Issuer Default Rating (IDR) at ‘AA-’ with a Stable Outlook, Short-term IDR at ‘F1+’, Support Rating at ‘1’ and Support Rating Floor at ‘AA-’.
The Individual Rating is affirmed at ‘B’.
Fitch said NBK’s Individual Rating reflects the bank’s leading domestic franchise, consistent profitability, sound asset quality, conservative risk profile and low funding costs.
Fitch said NBK’s IDRs reflect the extremely high probability of support from the government of Kuwait, should it be required, considering NBK’s importance to the Kuwaiti banking system, and the consistent support local banks have received from the authorities during past systemic crises. NBK’s IDRs have a Stable Outlook, reflecting the Kuwaiti sovereign’s ratings.
The rating agency stressed that NBK maintained sound profitability ratios in 2010, with net income 13.6 percent higher, assisted by a marked reduction in impairment charges, which represented a modest 5.9 percent of pre-impairment operating profit.
Net income continued to grow in Q111 and the bank is expected to generate sound profits throughout 2011, despite the more difficult conditions in certain Middle East markets.
Fitch highlighted that NBK’s asset quality ratios remain sound, a reflection of the bank’s conservative attitude to credit risk.
NBK reported a slight improvement in loan quality ratios during 2010, with non-performing loans at 1.7 percent of the total and coverage at 209 percent at end-2010. Past due but not impaired loans continued to fall in 2010.
Fitch said NBK has a strong and stable deposit base, both retail and corporate, and has benefited from a “flight to safety” during crises.
Capitalization improved in 2010, following a rights issue which raised KD163.5m including share premium.
Equity consists almost entirely of Tier I capital.
The Fitch core capital ratio stood at a strong 24.8 percent at end-2010. The Tier I ratio stood at 18.2 percent (end-2009: 14.5 percent).
The rating agency pointed out that NBK is the largest bank in Kuwait, with a market share of around 30 percent of loans and deposits.
It offers retail, private and corporate banking via an extensive domestic network of 71 branches. It also has an extensive international network in major financial centers worldwide and elsewhere in the Middle East.