Capital Intelligence (CI), the international credit rating agency, announced that it has affirmed Investbank’s (IB) Long and Short-Term Foreign Currency Ratings (FCRs) at ‘BB-’ and ‘B’, respectively. CI had recently lowered IB’s and all other Jordanian banks’ Long-Term FCR to ‘BB-’ from ‘BB’, following the agency’s lowering of Jordan’s Sovereign Long-Term FCR to ‘BB-’ from ‘BB’. The Outlook for IB’s FCRs remains ‘Stable’, in line with the Outlook for Jordan’s Sovereign FCRs. The Bank’s FCRs remain highly correlated with Jordan’s Sovereign Ratings. This reflects Investbank’s base of operations in Jordan and its relatively high exposure to Jordanian sovereign debt. Accordingly, the ratings remain highly correlated with the sovereign’s creditworthiness. The downgrade of the sovereign or any improvement in Jordan’s creditworthiness would have a corresponding effect on Investbank’s ratings. The Support Level remains at ‘3’, in view of the high likelihood of official support in case of need.
CI affirms Investbank’s Financial Strength Rating (FSR) at ‘BB+’ with a ‘Stable’ Outlook, on the basis of the Bank’s continuing strong liquidity and sound capital base, coupled with good and better than sector average operating profitability and strong effective non-performing loans (NPLs) coverage. The FSR is constrained by the comparatively high level of NPLs, which, in light of the difficult operating environment and increased geopolitical risks in the region, are likely to continue weighing on the asset quality of the Bank, whose operations are limited to Jordan. The FSR is also constrained by the high concentrations in both assets and liabilities. The Bank’s small size and limited market shares in loans and deposits remain constraining factors. Although Jordan’s economy is growing at a measured pace, ongoing geopolitical risks in the region could hamper the country’s projected economic expansion and elevate credit risk in the market. The effect of any downturn may place renewed pressure on Investbank’s asset quality and profitability (as is the case with other Jordanian banks as a group). Mitigating factors in this regard are the Bank’s sound capital base, strong operating profitability and high liquidity.
While IB ranks among the small-sized institutions in terms of assets in the Jordanian banking sector, its capital base is markedly larger than that of other small banks in the country. The exhaustive review of the credit portfolio (following the appointment of the new CEO in 2011) had initially produced a significant rise in NPLs and stepped up provisioning levels. Encouragingly, as at end Q3 2013, the NPL ratio declined to around the sector average and loan-loss reserve coverage for NPLs reached a strong level.
The successful rights issue a few years ago had enabled IB to meet new regulatory paid-up capital requirements and reaffirmed the shareholders’ commitment to support the bank in case of need. IB’s capital base provides good scope for business expansion over the near-to medium-term and an effective buffer against potential setbacks. Although liquidity has tightened somewhat, it continues to be a positive ratings driver, in common with other Jordanian banks, highlighting the relatively low share of loans in total assets. Funding is primarily sourced from customer deposits. The Bank’s operating profitability remained better than the sector average and provides the flexibility to create provisions as necessary. Net profit recovered somewhat in 2012 over the previous year, boosted by an exceptional gain from the sale of fixed assets. Net profit grew further during the first nine months of 2013, while the return on average assets (annualised) reached a very sound level.
Investbank was established in 1982 as a financial and investment company and was subsequently granted a license to operate as a commercial and investment bank in 1989. The Bank was set up by a group of prominent local businessmen, including Jordanian expatriates in Kuwait. The founding shareholders continue to have sizeable stakes in the Bank. Operations are focused on lending to commercial entities and individuals, treasury and financial brokerage. The current name was adopted in 2008 following a rebranding exercise (though its official name remains ‘Jordan Investment & Finance Bank’). The Bank reported total assets of JD747m ($1,052m) and total capital of JD138m ($194m) at end-September 2013.
Tel: +357 2534 2300
Tuesday, February 25- 2014 @ 14:58 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.