Islamic Development Bank’s long term and short term credit ratings were affirmed by Standard and Poor on Tuesday. The financial services company confirmed that the outlook for the bank is stable.
The report said that the bank’s capital position is extremely strong and its liquidity ample. Its long term credit received an AAA rating, while its short term credit was rated at A1+.
Farouk Soussa, credit analyst, Standard and Poor, said: “The ratings on the ISDB are supported by its very strong capitalisation, strong liquidity, and a good asset portfolio.”
He added that he expected the bank to continue to get preferred creditor treatment and support from its shareholders.
At the end of the latest Islamic calendar year (December 28th, 2008), the Islamic Development Bank Ordinary Capital Resources had a shareholders’ equity of Special Drawing Rights (SDR) at 5.5 billion, which exceeded the financing provided to member countries and other recipients.
Soussa said: “ISDB’s cash and placement with banks equalled more than ten percent of total assets at the end of the Islamic year, and assets with maturities of less than 12 months exceeded liabilities by more than 13 percent of total assets.”
The bank’s gross development related assets, which resulted from its murabaha, trade, lease, instalment sales and similar financings, were 75 percent of total assets at the year’s end.
While a number of ISDB’s DRA are in unrated or lower rated countries, the sovereign risk embedded in the DRA’s portfolio historically has been mitigated by the preferred creditor treatment the bank generally receives from its member countries. To mitigate private sector risk, ISDB typically obtains bank guarantees or collateral.