International Ratings agency Moody's Investors recently announced that it has changed to negative from stable the outlooks on Bahrain International Bank (BIB)'s financial strength rating and long-term foreign currency deposit rating, confirmed a press release.
Moody's said that the change in outlooks reflect BIB's declining financial flexibility following its poor performance in 2001, which resulted in a loss of $47 million. A key concern is the bank's liquidity position where around 87 percent of BIB's total liabilities mature within one year while a significant part of the bank's assets is constituted of non-liquid investments. Moody's also noted that BIB's low liquidity position coincides with heightened concerns over geo-political risk and unfavorable market conditions for exiting private equity investments, all calling for better liquidity ratios.
The bank’s capital has also been significantly affected by the recent losses. However, negative fair value adjustment accounts for a good part of the eroded capital, and if the valuation of global equities were to improve, BIB's capitalization could be lifted upwards.
The rating agency expressed its relative comfort as to BIB's current capitalization reflected in a 25 percent BIS capital adequacy ratio at year-end 2001 which is consistent with BIB's current ratings level. Moody's finally added that, it believes that BIB's management is taking the necessary steps to improve the bank's financial position. Such steps include de-gearing of the bank's balance sheet, increased focus on the Middle East and tightening operating expenses.
Established in 1982, BIB is a Gulf-based international investment bank providing investment and corporate financial services to its private and institutional clients in the Gulf and overseas. BIB has offices in Bahrain, the United States, London and Dublin. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
