Emerging markets rating agency Capital Intelligence (CI) has placed the ratings of Bank of Sharjah on a positive outlook following the substantial increase in capital this year, which strengthens the balance sheet, stated a press release.
A possible rating upgrade at the next review will depend on how the bank will use its new capital to create opportunities for growth in the future. The bank’s good management and strong financial fundamentals underpin its financial strength rating, which was affirmed at BBB-.
The bank’s foreign currency ratings have been affirmed at BBB- long-term and A3 short-term. Although the bank can no longer rely on support from BNP Paribas, whose 19 percent stake was sold to existing shareholders last year, the quality of support from the principal shareholders has not been diluted.
The government of Sharjah and other major shareholders have demonstrated their commitment by subscribing to the large rights issue of the bank this year. It is not yet clear what the bank will do with its new capital, however, BOS believes that there are sufficient business opportunities in the country to enable it to grow organically.
Although technical support from BNP is phased out, the bank has become a mature institution with well-developed controls and systems, and with considerable knowledge of operating in the region, stated CI. Moreover, its experienced management team is unchanged. The bank will continue to benefit from BNP Paribas’ large network of international branches and affiliations as a correspondent bank. However, it is also free to develop other, perhaps more lucrative, banking relationships in the future.
The advice and guidance of BNP Paribas representatives on the board will continue to be available to the bank for a while, but its future strategies will be fashioned by the representatives of the major shareholders who are now all United Arab Emirates (UAE) nationals. CI believes that the good risk management, credit controls and the strong procedures that were in place in the past will continue to exist and be strengthened.
The Bank’s strategies have not changed for several years. It remains a corporate banking institution with a strong trade finance focus and a limited range of retail banking services to protect its individual customer base. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
