The rating agency believes that it will take a few years for the lender to restore its key asset quality parameters to their previous sound levels.
Thursday 21, March 2019 BY KUDAKWASHE MUZORIWA
CI Ratings has lowered the financial strength rating (FSR) of Sharjah-based Invest Bank to BB from BBB- amid the bank’s deteriorating asset quality, impaired capital base and weak profitability ratios.
In a statement, CI stated that the two-notch lowering of the FSR also takes into consideration that the bank’s key asset quality parameters could weaken further this year and that major financial metrics are likely to remain weak for the next 12 to 18 months.
Additionally, the bank’s long-term foreign currency rating (FCR) is affirmed at BBB-and the Short-
The FCRs are substantially supported by the demonstrated funding provided by the Sharjah government, which will shortly acquire a majority stake in the lender following regulatory and shareholder approvals.
The Government has already provided AED 1.1 billion, already available to the bank as a deposit. It has also agreed to underwrite a rights issue which is to be announced later during the year.
IB’s credit portfolio mainly consists of exposures to medium-sized entities in the emirates of Dubai, Sharjah and Abu Dhabi. The increase in impaired loans in recent years is attributed to problems in the manufacturing, construction and real estate sectors related to the economic slowdown.