Strong share­holder sup­port for Api­corp credit pro­file FI­NANCE

The National - News - - BUSINESS - SARMAD KHAN

Arab Petroleum In­vest­ments Cor­po­ra­tion (Api­corp), the Saudi mul­ti­lat­eral de­vel­op­ment bank, en­joys a ro­bust cap­i­tal ad­e­quacy, a high-qual­ity in­vest­ment as­set port­fo­lio, de facto pre­ferred cred­i­tor sta­tus and strong share­holder sup­port, ac­cord­ing to Moody’s In­vestors Ser­vice

“Api­corp has main­tained a high level of eq­uity rel­a­tive to its risk as­sets, and its cor­re­spond­ing cap­i­tal ad­e­quacy ra­tios ex­ceed reg­u­la­tory guide­lines,” St­ef­fen Dyck, a vice pres­i­dent and se­nior credit of­fi­cer at Moody’s said in a re­port.

“Rel­a­tively low lever­age also con­trib­utes to Api­corp’s high in­trin­sic fi­nan­cial strength, while the in­crease in callable cap­i­tal in 2016 un­der­lines its share­holder sup­port,” Mr Dyck, who co-au­thored the re­port added.

Founded in 1975 by the 10 Opec mem­ber coun­tries, Api­corp is man­dated to make in­vest­ments that will bring strate­gic ben­e­fits to its mem-

bers. The bank, which has its head­quar­ters in Dam­mam, is an in­de­pen­dent fi­nan­cial in­sti­tu­tion func­tion­ing and car­ry­ing out its op­er­a­tions on a com­mer­cial ba­sis.

The bank’s strong cap­i­tal po­si­tion and low lever­age off­set its some­what weaker-than peers as­set qual­ity in its lend­ing ac­tiv­ity, Moody’s noted. Api­corp’s cap­i­tal po­si­tion is also sup­ported by the strong qual­ity of its as­set port­fo­lio, re­flected in com­par­a­tively high weighted av­er­age credit rat­ings for dif­fer­ent as­set classes, the agency added.

A fund­ing pro­file marked by a com­par­a­tively high share of short-term whole­sale de­posits is among the bank’s credit chal­lenges, ac­cord­ing to Moody’s.

The bank has a rel­a­tively large as­set-li­a­bil­ity ma­tu­rity mis­match, and high ge­o­graphic and sec­tor con­cen­tra­tion rel­a­tive to its peers. Api­corp is mak­ing ef­forts to di­ver­sify its fund­ing sources, the agency noted.

“Nev­er­the­less, the de­gree to which the cor­po­ra­tion re­mains re­liant on whole­sale de­posits ad­versely af­fects Moody’s as­sess­ment of its liq­uid­ity,” it said.

The bank is op­er­at­ing in chal­leng­ing en­vi­ron­ment, given the po­lit­i­cal tur­moil in a num­ber of mem­ber coun­tries since 2011, which is topped by re­cent rifts in the re­gion and a sus­tained de­cline in oil prices that con­trib­uted to a year-on-year net profit de­cline of 13.2 per cent in 2016.

That said, as­set qual­ity and cap­i­tal ad­e­quacy have not been ma­te­ri­ally im­pacted yet.

Ben­nie Burger, the head of cor­po­rate strat­egy and in­vest­ments at Api­corp, in March this year, said that the bank ex­pects the Mena re­gion to open up to new in­vest­ment op­por­tu­ni­ties as coun­tries push through re­forms in an ef­fort to pre­pare their economies for a post-oil world.

“The Saudi Aramco [IPO] and Vi­sion 2030 have really cre­ated a lot of op­por­tu­ni­ties, and not just limited to Saudi Ara­bia,” he said at the time.

Api­corp set a strat­egy four years ago with ob­jec­tives that in­cluded in­vest­ing out­side Mena, the trans­fer of tech­nol­ogy to the en­ergy sec­tor in its mem­ber coun­tries, as well as ac­quir­ing pri­vate eq­uity skills through part­ner­ships

Api­corp can count on a strong port­fo­lio of as­sets and high weighted credit rat­ings Api­corp

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