The international credit rating agency Moody’s has upgraded Gulf International Bank’s (GIB) long- and short-term deposit ratings to “A2” and “F1,” from “A3” and “F2” respectively.
This follows a review of GIB’s assigned ratings based on Moody’s refined bank rating methodology. GIB’s subordinated debt rating has also been upgraded to A3, from Baa1.
Moody’s explained in its updated credit opinion that “the rating is supported by the Bank's sound merchant banking franchise in the Gulf Cooperation Council (GCC) states, its modest market and credit risk appetite and also its healthy capitalisation and asset quality metrics.” It added that “GIB's long-term deposit rating of A2 incorporates a very high likelihood of support from its shareholders.”
The rating agency’s report also referred to GIB’s market leadership as a particularly positive characteristic. “GIB's status as one of the largest and best-connected regional providers of merchant banking services in the GCC should ensure a steady stream of new business over the coming years, supporting franchise value.”
In addition, the report emphasized the importance of GIB’s competitive advantage. Although other local and international banks offer similar services, Moody’s believes that “through its prominent franchise position, the Bank can continue to generate a strong flow of business over the medium term…. We attribute the sustainability of GIB's core business to strong regional relationships and technical know-how.”
Another important element of GIB's business profile is its strong asset management activity. With more than US$ 22 billion in client assets under management, GIB is the largest Arab-owned commercial asset manager in the GCC, according to Moody’s.
Moody’s also commended GIB for its efficiency. “The very good control of GIB's expenses is evidenced by an only moderate increase in operating expenses despite the significant increase in operating income. This translates into a healthy cost-to-income ratio of 35.5% and an A score for efficiency,” said Moody’s.
Commenting on the rating upgrades, Dr. Khaled M. Al-Fayez, GIB’s Chief Executive Officer, said: “Moody’s report is a strong testimony of GIB’s sound business strategy, which has led in the past few years to a significant expansion in its operations and in its fee-based income.”
He added that “although GIB is one of the highest rated Middle East banks, we are committed to maintaining and improving our credit ratings. We are confident that our franchise in the region is getting stronger, and the high quality of our assets is continuously improving. This we hope will lead to additional rating upgrades in the future.”
