Strong shareholder support for Apicorp credit profile FINANCE
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