Global Arab Network | Deteriorating Asset Quality - Kuwait Finance House Placed on Negative Credit-Watch

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Deteriorating Asset Quality - Kuwait Finance House Placed on Negative Credit-Watch

Global Arab Network - - Gamal Ragay

Wednesday, 26 May 2010 18:12

Deteriorating Asset Quality - Kuwait Finance House Placed on Negative Credit-Watch

Standard & Poor's Ratings Services said today that it has placed its 'A-' long-term counterparty credit rating on Kuwait Finance House (KFH) on CreditWatch with negative implications. At the same time, the 'A-2' short-term counterparty credit rating was affirmed.

"The rating action reflects our view that the material deterioration of asset quality indicators and reduced revenue generating capability--linked to the bad performance of equity and real estate markets--have negatively affected KFH's financial profile," said Standard & Poor's credit analyst Nicolas Hardy.

The bank's leading position in Islamic banking in Kuwait, adequate capitalization and good financial flexibility, derived from its close links with the government, including a significant government ownership, are important mitigating factors for the ratings though.

"To resolve the CreditWatch placement, we will analyze in detail the bank's exposures to the real estate and construction sector, as well as the performance of the bank's operations and activities outside of Kuwait, especially the performance of KFH's banking subsidiaries in Turkey and Malaysia," said Mr. Hardy.

S&P will also review KFH's exposure to the Kuwaiti investment companies. In addition, S&P will review KFH's risk management capabilities, and how the strategy is evolving in order to adapt to the changing operating environment. S&P expects to reassess the CreditWatch status in the coming weeks or months following consideration of the above factors. S&P anticipates that S&P would not lower the long-term rating by more than two notches.

Global Arab Network

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