International rating agency Fitch Ratings and Maghreb Rating, Fitch's Tunisian affiliate, have removed Banque Tuniso-Koweitienne de Developpement (BTKD) from rating watch negative and affirmed its ratings at national long-term AA-(tun) and national short-term F1+(tun), outlook stable.
At the same time the agency has placed Banque de Tunisie et des Emirats d'Investissement's (BTEI) long-term BB+, short-term B, national long-term A+(tun) and national short-term F1(tun) ratings on rating watch positive.
The rating actions reflect reassurances that the Tunisian state remains highly supportive of the country's key development banks. The probability of support has not diminished by the planned transformation of both banks into universal banks.
BTKD is controlled equally by the Tunisian and Kuwaiti states, while BTEI is held in equal parts (38.9 percent of share capital/50 percent of voting rights) by the Tunisian State and the Abu Dhabi Investment Authority (ADIA). Both banks are in the throes of being transformed into universal banks, while at the same time retaining their core development functions.
Given the important roles both banks play in the local economy and irrespective of their proposed change of status, Fitch Ratings and Maghreb Rating consider that there is a high probability that the Tunisian state would support both BTKD and BTEI, should this be required.
Support from the Kuwaiti state, which has been supportive of its banks in the past, is also considered highly probable for BTKD. Support for BTEI from ADIA, if required, is considered possible.
BTKD's national ratings were placed on rating watch negative in May 2003 following the announcement that it planned to transform itself into a universal bank. The agency has since reviewed BTKD's projections. The agencies concluded that competing with commercial banks will pose a considerable challenge, requiring new skills and clients plus a branch network.
While doubts about future profitability and risk management experience exist, the agencies are, however, reassured of strong shareholder support; thus the negative rating watch has been removed and BTKD's national ratings are affirmed.
A negative outlook was assigned to BTEI's long-term ratings in October 2002, reflecting uncertainties regarding the bank's future provisioning requirements, while also highlighting concerns about asset quality. While these doubts remain, reassurances of shareholder support have produced a change of opinion regarding the bank's credit worthiness.
Thus, the bank's foreign currency and national ratings have been placed on rating watch positive. A full review of BTEI will be conducted during the third quarter of 2003, following which the rating watch will be resolved. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
