Global Arab Network | Fitch Affirms Jordan Islamic Bank at 'BB-' with Stable Outlook

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Fitch Affirms Jordan Islamic Bank at 'BB-' with Stable Outlook

Global Arab Network - - George Haddad

Wednesday, 16 June 2010 13:46

Fitch Ratings has today affirmed Jordan Islamic Bank's (JIB) Long-term Issuer Default Rating (IDR) at 'BB-', Short-term IDR at 'B', Support Rating at '3' and Support Rating Floor at 'BB-'. The Outlook on the Long-term IDR is Stable. Fitch has also affirmed the bank's Individual Rating at 'C/D'.

JIB's ratings are to a large extent constrained by the relatively weak operating environment in Jordan. The ratings further reflect JIB's fairly basic risk management systems and the possible impact of the current uncertain economic environment on the bank's asset quality. The affirmation of the bank's ratings also reflects its strong franchise in Islamic banking in Jordan, especially in the retail segment, as well as its sound core profitability, stable funding base and strong liquidity.

Profitability weakened across most of the Jordanian banking sector in 2009 as the economic slowdown resulted in lower growth in business volumes and rising impairment charges. JIB's net profit declined 21%, mainly due to lower securities gains. However, underlying profitability strengthened in Q110 y-o-y, driven by wider financing margins.

Asset quality deteriorated across the sector during 2009, but JIB's asset quality ratios compare well against many of its peers. Impaired financings were 3.7% of the total at end-2009 although increased during Q110, with the impaired financing ratio reaching a still reasonable 4.5%. The ratios exclude arrears on the bank's leasing operations.

Non-equity funding consists entirely of customer deposits. JIB has a solid and stable deposit base among smaller retail depositors, including small businesses. Over 90% of the bank's deposits are retail and concentrations are therefore very low. The bank has a highly liquid balance sheet with cash and bank placements accounting for 40% of total assets at end-Q110. Capital ratios strengthened slightly during 2009 and are adequate, with a Tier 1 ratio of 13.3% and a total capital ratio of 14.5% at end-2009.

Established in 1978, JIB is the largest Islamic bank in Jordan. It is 66%-owned by Bahrain-based Al Baraka Banking Group.

A credit report on JIB will be shortly available on the agency's website, www.fitchratings.com, under Financial Institutions/Banks/Full Rating Reports.

In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs.

Global Arab Network

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