Ibdar Bank assigned 'BB' Long-Term and 'B' Short-Term with Stable outlook

January 29, 2018
International credit rating agency, Capital Intelligence Ratings (CI Ratings or CI), has assigned Ibdar Bank (IB) in Bahrain a Long-Term Foreign Currency Rating of ‘BB’ and a Short-Term Foreign Currency Rating of ‘B’ in its first rating of the bank.

The ratings are supported by the Bank’s low leverage and in particular the limited borrowings in relation to total capital as well as solid capital adequacy, including a high CET 1 component, and the comfortable liquidity position along with the extended debt maturity profile. The Bank’s utilisation of short-term borrowing remains very limited. The main constraining factors on the rating are the significant share of total assets in Bahrain (where sovereign risk has increased), the small balance sheet, and the successive net losses posted in each of the previous three years.

The other rating constraints are the sizeable portfolio of legacy illiquid investments (mostly equities), which generate very little income and the challenging regional economic environment exacerbated by low oil prices. The Outlook on the Ratings is ‘Stable’ given the expectation that the Bank will have returned to profitability in full year 2017.

IB is the institution created four years ago following the merger of three relatively small Bahrain-based Islamic investment banks (Elaf Bank, Capivest and Capital Management House) and has since evolved into the third largest Shari’ah-compliant investment bank in Bahrain, despite the erosion of capital due to net losses in the period 2014-16. As part of management’s adopted policy to address historical asset quality concerns, the Bank has continued to cleanse the balance sheet from impaired legacy investments. In this regard, ongoing substantial impairment provisions produced a larger and significant net loss in 2016.