Global Arab Network | Fitch Affirms Jordan Islamic Bank for Finance and Investment at 'BB-'

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Fitch Affirms Jordan Islamic Bank for Finance and Investment at 'BB-'

Global Arab Network - - Adam Turner

Tuesday, 21 April 2009 22:39

Fitch Ratings has today affirmed Jordan Islamic Bank for Finance and Investment's (JIB) ratings at Long-term Issuer Default (IDR) 'BB-' (BB minus) with Stable Outlook, Short-term IDR 'B', Individual 'C/D' and Support '3'. The Support Rating Floor was affirmed at 'BB-' (BB minus).
JIB's ratings reflect its strong franchise in Islamic banking in Jordan, good profitability, strong liquidity and substantial retail funding franchise. The ratings also reflect the bank's potentially volatile operating environment, its fairly basic risk management systems, and the possible deterioration in asset quality especially in the current uncertain economic environment.

The Jordanian banking sector has generally not been materially affected by the global credit crunch; on the whole banks invest locally or regionally and funding is mostly local deposits that have so far been stable.

JIB has been quick to capitalise on the comparatively good economic conditions in Jordan during 2008 and also on a rising interest in Shari'ah-compliant banking. Profitability continued to strengthen and in 2008 JIB posted a 53% increase in net profit, one of the highest growth rates among domestic peers.

Financing accounts for about half of the bank's assets and most of its risks. Financing grew by about 26% in 2008, and asset quality ratios improved during the period. The bank has a strong domestic funding franchise, especially among retail depositors, which account for more than 90% of the total.

JIB has a liquid balance sheet with about a third of its assets in cash and bank placements at end-2008. The bank's capital adequacy ratio decreased to 13.7% at end-2008, weaker than most peers' but still above the central bank's required minimum. Free capital is relatively low, constrained by investments in associated companies and in real estate.

JIB is the largest (and the oldest) Islamic bank in Jordan. It has built up a substantial franchise especially in the retail sector; by 2008, it was the fifth-largest bank in Jordan by total assets and had market shares of about 7% of financing and 9% of system deposits. The bank's main shareholder is the Bahrain-based Al-Baraka Banking Group with a 65% stake.

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