Global Arab Network | CI Affirms International Bank of Yemen Positive Financial Strength Rating

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CI Affirms International Bank of Yemen Positive Financial Strength Rating

Wednesday, 19 January 2011 23:36

Yemen (Sanaa) - Capital Intelligence (CI) has announced that it has assigned a ‘Positive' Outlook to International Bank of Yemen's (IBY) Financial Strength rating which currently stands at ‘B'. At the same time, CI affirmed IBY's Long-Term and Short-Term Foreign Currency ratings at ‘B' and ‘B' respectively with a ‘Stable' Outlook, Global Arab Network reports according to a press statement. Both ratings are constrained by Yemen's Sovereign rating. IBY's Support rating was maintained at ‘4'. All ratings continue to reflect the very challenging operating environment.

In line with the banking sector profile, IBY's loan portfolio is relatively small as a proportion of total assets with the major asset category including Yemeni government treasury bills. Loan asset quality is poor due to a high level of non-performing loans against gross loans. However, the provisioning level is improving and the ratio of unprovided non-performing loans to free capital has continued to fall. Much of the classified loans are due to the government's delay in paying contractors; payment is made in the end in most cases but there can be a long delay.

The capital adequacy ratio, aided by the high level of treasury bills, improved in 2009 following an increase in paid-up capital. Profitability fell in 2009 mainly due to a higher provision charge combined with a weaker interest differential. The latter was due to the decrease in domestic interest rates which has hit yields, particularly of T-bills. Nonetheless, IBY has high margins, boosted by a low cost deposit base. Liquidity is adequate due to its relatively large deposit base and very high level of liquid assets. Results to end-June 2010 were quite stable. Overall, the ‘Positive' Outlook attached to the Financial Strength rating reflects the increased capital position, continued sufficient liquidity profile, and decline in unprovided non-performing loans to free capital.

IBY was established in January 1979 by a Presidential decree. The Bank administers its operations in the Republic of Yemen through its head office located in Sana'a and eighteen other branches (Sana'a, Aden, Hodeidah, Taiz, Seiyun and Mukalla). It also has a branch in Djibouti. IBY's shareholder base is quite widely dispersed. The two biggest shareholders are the Late Khaled Bin Salem Bin Mahfooz family of Saudi Arabia (17.68%), and Abdul Jalil Besher (15%).

Most of IBY's current activities are basic banking services including trade finance and working capital loans. Going forward, management is aiming to focus more on the retail market, using its relatively wide ATM network (66), POS terminals (525) and existing branch network. IBY's principle strategy is to continue to grow the asset base in a controlled manner through focusing specifically on retail and commercial loans.

IBY controls around eleven per cent of Yemeni banking system assets. At year-end 2009, IBY's total assets amounted to YER147,606mn (USD712mn). As at end-June 2010, total assets increased by 20% to YER177,364mn driven by customer deposits.

Global Arab Network

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