At the same time, CI has affirmed the Bank’s Financial Strength rating at ‘BB-’. YBRD’s Support rating was maintained at ‘3’, reflecting majority government ownership combined with moderate capacity of the government to support the banking sector. The Outlook on all ratings is ‘Stable’. The operating environment remains very challenging with difficult banking conditions, and this position is reflected in the Bank’s ratings.
YBRD has a sound domestic franchise in the Yemeni banking sector. As with most other Yemeni banks, the asset side of YBRD’s balance sheet is characterised by a large percentage of Yemeni government treasury bills and central bank / cash placements. Banking products and services offered are quite limited at this stage. The loan book, mainly short-term trade and working capital loans, is very small as a proportion of total assets but its quality suffers from a large percentage of NPLs.
However, in mitigation, YBRD’s impaired loans have declined over the past three years, are adequately provided for and a large proportion are of historical nature. The balance sheet is well capitalised. Moreover, there is some hidden value in the balance sheet connected to YBRD’s investment and property portfolio as fair value is in excess of book value. Profitability is adequate despite the decline in 2009; the previous year’s net profit was aided by land sale and provision write backs. Nonetheless, net interest income has weakened slightly due to lower market interest rates.
YBRD was established in Sana’a, Republic of Yemen, on 28 October 1962 as a public shareholding company. 50% of its paid-up capital is owned by the Government of the Republic of Yemen. The remaining 49%, widely distributed, is owned by the private sector. YBRD controls around 9% of total Yemeni banking sector assets.
The Bank undertakes most banking activities through its head office in Sana’a and an additional 43 branches spread throughout Yemen. At end 2009, total assets amounted to YER122,305m (USD equivalent 590m). Products and services (mainly commercial loans with call, savings and time deposits) are limited, as is the case for all Yemeni banks. Going forward, the long-term plan is to broaden the product and service base, particularly in the areas of loans in the retail and SME sectors. Credit cards are offered on a very limited scale but this is also an area of planned development. YBRD’s principal business strategy is to continue to grow its asset base and build its banking franchise in Yemen.
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