Global Arab Network | Fitch Affirms National Bank of Kuwait at 'AA-' with a Stable Outlook

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Fitch Affirms National Bank of Kuwait at 'AA-' with a Stable Outlook

Global Arab Network - - Mohammed Almasri

Monday, 15 February 2010 18:52

Fitch Ratings has today affirmed the National Bank of Kuwait's (NBK) Long-term Issuer Default Rating (IDR) at 'AA-' with a Stable Outlook. Fitch has affirmed NBK's Short-term IDR at 'F1+', Support Rating at '1' and Support Rating Floor at 'AA-'. The Individual Rating is affirmed at 'B'.

The affirmation of NBK's IDRs and Support Rating reflect the extremely high probability of support from the government of Kuwait ('AA'/'F1'+; Stable Outlook), in case of need. The Individual Rating reflects the bank's leading domestic franchise, consistent profitability, sound asset quality, conservative risk profile and low funding costs. It also reflects the bank's geographic expansion into potentially riskier markets.

NBK maintained its record of performance stability in 2009, despite the deteriorating operating environment. A 4% y-o-y increase in 2009 net profit was driven by a slight increase in net interest income together with stable fee income, stronger investment-related gains and lower impairment charges. In contrast to most of its peers, NBK reported an improvement in loan-quality ratios, with non-performing loans representing 1.8% of total loans at end-2009 (2% at end-2008), and stronger loan coverage at 208%. Impairment charges were comparatively modest at 17% of pre-impairment operating profit.

NBK built up a 40% stake in Boubyan Bank, one of the smaller Kuwaiti banks with an Islamic banking licence, during 2009. NBK plans to establish a presence in the Islamic banking market in Kuwait and is keen to increase its stake in Boubyan Bank, although this will require approval from the Central Bank of Kuwait (CBK). The acquisition of the 40% stake in Boubyan Bank slightly weakened NBK's capital ratios, but the acquisition is likely to strengthen the bank's domestic franchise in the medium term.

NBK has a strong and stable deposit base, with respect to both retail and corporate banking, and benefits from a "flight to safety" during financial crises. Apart from loans, the bank's balance sheet consists mostly of liquid assets, government debt and interbank placements. Capitalisation remains sound with a Tier I capital ratio of 14.5% at end-2009. NBK is planning a 10% capital increase during 2010 through a rights issue.

NBK is the largest bank in Kuwait by assets, with a dominant market share in both retail and corporate banking. It offers retail, private and corporate banking via an extensive domestic network of 69 branches supported by a variety of distribution channels. Investment banking is provided through the bank's subsidiary, NBK Capital. The bank has the strongest international presence of any Kuwaiti bank with a relatively wide international network of branches, subsidiaries and associates. NBK's shares are listed on the Kuwaiti stock exchange.

Global Arab Network

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