Global Arab Network | Arab Tunisian Bank ratings reflect sound profitability and high liquidity

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Arab Tunisian Bank ratings reflect sound profitability and high liquidity

Global Arab Network - - George Haddad

Thursday, 22 July 2010 09:22

Tunisia (Tunis) Fitch Ratings has today affirmed Arab Tunisian Bank's (ATB) Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'BBB+' with Stable Outlooks. A full rating breakdown is provided at the end of this comment.

ATB's Long- and Short-term IDRs and Support Rating are driven by a high probability of support from its majority (64.2%) shareholder, Arab Bank plc (AB, rated 'A-'/Outlook Stable). The Tunisian bank's Individual Rating reflects its sound profitability, relatively high liquidity and increasing capital base. However, the ratings also factor in asset quality issues and concentration in the funding base.

In 2009, ATB's operating profitability was slightly weakened by lower interest rates, reducing the net interest margin (NIM) to 2.79% from 3.02% in 2008. Gross loan growth slowed to 9.8% from 25% in 2008 amid sluggish economic conditions. Operating returns on average equity and asset held up reasonably well at 16.7% and 1.4% respectively, after ATB reduced loan impairment charges to TND8.4m from TND11.4m.

ATB's risk is mainly credit-oriented. Notwithstanding the steady improvement in asset quality (gross impaired loans of TND203.3m, or 11.2% of gross loans, compared with TND209.2m, or 12.4%, in 2008), asset quality remained constrained by high concentrations. At end 2009, net impaired loans accounted for 17.6% of equity (2008: 22.4%).

ATB is mainly funded by client deposits, which represented nearly 80% of non-equity funding at end-2009. Despite the deposit concentration (the top 20 customers account for nearly 30% of total client funding), liquidity risk is mitigated by a satisfactory level of liquid assets (49% of total assets at end-2009, of which 25.4% are placed with AB) and the bank's ability to call on AB's credit lines in times of stress. ATB's liquidity is tightly controlled by AB. ATB's tier 1 ratio stood at 11.8% at end-2009.

ATB is a medium-sized Tunisian bank, which provides a full range of retail banking services through 101 branches. At end-2009 it had 8.9% and 5.6% shares of the system's deposits and credit respectively.

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