International rating agency, Capital Intelligence has downgraded the long and short-term foreign currency ratings of Bahrain International Bank (BIB) to BB and B respectively. The Bank's major activity is direct corporate investment and real estate development opportunities in the United States and Europe.
The agency commented that BIB recorded a large loss of $47 million in 2001 due to the effects of the downturn in global markets, reduced investment banking activities and accounting changes. A substantially higher provision charge was made, primarily to cover the Bank's US exposure. Results highlighted BIB's vulnerability to earnings fluctuations due to the fact that it relies on the realization of longer-term illiquid investments.
BIB has embarked on a strategy of reducing the scale of its private equity holdings. Net profit of $2.2 million in the first quarter of 2002 was achieved, aided by significant gains on the sale of corporate and government securities.
The Bank recently sold a strategic stake in Coast Development & Investment Company, am Kuwaiti investment company, and divested a small investment in Capital Recovery Services, a US-based debt recovery services company. The profit on sale of approximately three million dollars should have a positive impact on BIB's second quarter earnings.
The Bank is closely managing expenses and realizing additional securities sales in order to steadily reduce leverage and restore profitability. Capital Intelligence added however that market conditions remain very challenging. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
