Fitch Ratings has assigned long-term, short-term, individual and support ratings to Kuwait Finance House (KFH) of BBB+, F2, C and 2 respectively. The rating outlook is stable.
The bank's ratings reflect its strong domestic franchise, the bank's shareholding structure, through which potential support would be forthcoming, together with consistently strong profitability, low cost funding and adequate capitalization.
The bank enjoys a competitive advantage since it is the only Islamic bank operating in Kuwait. This gives the bank access to a set of unique customers who want to bank in accordance with Sharia'a principles.
These factors are balanced by potential concerns over the proposed change in banking regulations which will permit other local commercial banks to offer Islamic banking services as a separate activity and relatively high exposure to property financing in a small market.
Performance has been stable over time and benefits from the bank's Islamic principles whereby it has access to a strong customer deposit base. Asset quality is sound with relatively low levels of impaired loans and ample reserve coverage. Core lending activities are funded by a growing and stable customer deposit base and the bank remains adequately capitalized.
Kuwait Finance House was incorporated in the State of Kuwait in 1977 by a government decree and is the only licensed bank in the state that operates under full Islamic principles. The Government of Kuwait holds a 45.54 percent shareholding in the bank, represented by the Kuwait Investment Authority (KIA) with 26.16 percent, the Public Authority for Minor Affairs with 10.69 percent and the Kuwait Awkaf Foundation with 8.69 percent.
The remaining 54.46 percent of KFH’s shares are widely held by local investors. As an Islamic bank the KFH provides a broad range of products that comply with Islamic Sharia'a, with a dominant franchise in automobile, consumer durable and property financing. Operating through 27 local branches supported by a modern distribution network, KFH has built up a 20 percent market share of deposits and 19 percent share of loans.
Fitch's Support and Individual Ratings for Banks assess how a bank would be viewed if it were entirely independent and could not rely on external support. Its support ratings deal with the question of whether a bank would receive support from its owners or from the state if it were to get into difficulty. These ratings are not debt ratings but rather, respectively, an assessment of the intrinsic strength of a bank and of any level of outside support that may, or may not, be available to it. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
