UAE-based Invest Bank’s Foreign Currency and Financial Strength Ratings Affirmed with ‘Stable’ Outlook

- Amal Hasson
Thursday, 21 July 2011 12:49
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Global Arab Network - Capital Intelligence (CI) has announced that it has maintained Invest Bank’s (IB) Foreign Currency ratings at ‘BBB’- Long-Term and ‘A3’ Short-Term. The ratings are underpinned by the support of the federal government and the Bank’s strong capital adequacy ratio. The Support Rating is maintained at ‘3’ and reflects its private-sector ownership. IB’s Financial Strength rating is affirmed at ‘BBB-‘, with the Bank’s strong capital base and good profitability being major supporting factors and its small balance sheet and the high customer concentrations in its deposit base being constraining factors. A ‘Stable’ Outlook is assigned to all the ratings.

Invest Bank (IB) has managed the economic downturn reasonably well. The Bank continued to maintain a high level of capital and indeed its capital adequacy ratio at end 2010 was one of the best in the UAE banking sector. The Bank also experienced fewer asset quality problems than many of its peers, partly because as a corporate banking institution it had a relatively small unsecured retail credit portfolio, which saw significantly increased delinquencies in the banking sector. IB also had no exposures to two major Saudi-based business groups that defaulted in 2009, unlike many other banks in the country. IB’s asset quality ratios strengthened last year partly due to write-offs of older bad loans. While non-performing loans (NPLs) did rise in 2009 and 2010 owing to the weaker credit environment, the Bank’s strong operating profitability enabled it to comfortably absorb the higher provision charges. Liquidity ratios tightened last year but were at acceptable levels. Net profit growth was modest last year, however key profitability ratios were strong. IB offers plain vanilla banking products to small and medium-sized companies and its personalised services permit high margins.

IB was incorporated in the emirate of Sharjah in 1975. Its principal shareholders are businessmen from Sharjah and Abu Dhabi. With total assets of AED10 billion at end-March 2011, it ranks among the smaller banks in the country. The Bank is primarily a corporate banking institution. The bulk of its customers are small and medium-sized companies, although with the growth of the Bank’s capital IB is increasingly in a position to reach out to some of the larger companies as well. Contractor and trade finance and loans to manufacturing companies are important corporate banking activities. The Bank operates a small network of 12 branches.