Stan­dard and Poor’s re­vises GBK’s out­look to ‘pos­i­tive’ from ‘sta­ble’

Kuwait Times - - BUSINESS -

Stan­dard and Poor’s (S&P) Global Rat­ings has re­vised the out­look of Gulf Bank’s Credit rat­ing to “Pos­i­tive” from “Sta­ble” and af­firms its A-/A-2 long and short-term coun­ter­party credit rat­ings on the Bank. S&P Global Rat­ings an­nounced in its re­cent re­search up­date of Gulf Bank that the Bank has im­proved its cap­i­tal­iza­tion and re­duced the risk on its loan book over the past three years. They now be­lieve the bank can main­tain a risk-ad­justed cap­i­tal (RAC) ra­tio above 10%, as­sum­ing a nor­mal­iz­ing cost of risk, a mar­ginal im­prove­ment in mar­gins, and growth of more than 5% in lend­ing over the next two years.

In ad­di­tion, Gulf Bank has con­tin­ued with ini­tia­tives to im­prove its risk pro­file. The Bank has made vis­i­ble progress in re­solv­ing its large le­gacy prob­lems as shown by re­cov­er­ies on old prob­lem loans in 2016. S&P Global Rat­ings af­firmed their rat­ings be­cause of Gulf Bank’s business po­si­tion and sta­bil­ity, de­rived from its sta­tus as the fourth-largest com­mer­cial bank in Kuwait. Gulf Bank has mar­ket shares in loans and de­posits of close to 10% and is im­prov­ing its rev­enue mix. In S&P’s view, the Bank has de­liv­ered on its com­mit­ment to turn around its business model since the global tur­moil in 2009.

Gulf Bank’s fund­ing and liq­uid­ity pro­file will re­main re­silient to the low oil-price en­vi­ron­ment and sup­port our rat­ings, said S&P Global Rat­ings. The bank’s broad liq­uid as­sets suf­fi­ciently cover short-term whole­sale fund­ing needs. The rat­ings con­tinue to re­flect S&P Global Rat­ing’s view of Gulf Bank’s high sys­temic im­por­tance in Kuwait and the Kuwaiti au­thor­i­ties’ highly sup­port­ive stance to­ward the bank­ing sec­tor. As a re­sult, the long-term rat­ing on Gulf Bank ben­e­fits from three notches of up­lift, re­flect­ing their view of a high like­li­hood of ex­tra­or­di­nary govern­ment sup­port for the bank if needed.

The pos­i­tive out­look re­flects a one-inthree like­li­hood that Gulf Bank will main­tain the pos­i­tive mo­men­tum in cap­i­tal and risk over the next 24 months. S&P men­tioned that the rat­ing of the Bank will be raised if the RAC ra­tio sus­tain­ably ex­ceeds 10%, most likely through im­proved cap­i­tal gen­er­a­tion and mod­er­ate div­i­dends.

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