Moody reaffirms Arab bank’s ‘stable’ outlook

Moody's report acknowledges Arab Bank's resistance to global financial turmoil.
Moody reaffirms Arab bank’s ‘stable’ outlook
By Gavin Davids
Tue 22 Dec 2009 10:04 PM

Arab Bank’s A3 rating has been confirmed by financial research agency Moody’s, which has given it a ‘stable’ outlook on account of its resistance to the global economic crisis.

According to a recent report issued by the Moody’s Investors Service, Arab Bank’s ‘stable’ outlook has been boosted by its conservative investment, liquidity and risk profile, combined with strong capitalisation levels.

Reacting to the report,Abdel Hamid Shoman, chairman and chief executive officer of Arab Bank said that the affirmation of the rating reflected the confidence of the various parties dealing with Arab Bank, and confirmed the bank's permanence in the Arab and international markets.

Last year, Moody’s had given a dark ratings outlook for Gulf Arab banks, given the credit crisis, but had added that it would remain largely stable, except for Dubai where the outlook was more negative due to real estate exposure.

General manager for Moody's Middle East Mardig Haladjian said:"We don't really see an emergency situation developing in the Gulf. Liquidity will be tighter, but it can be managed and it can be replaced.”

This year’s report said Arab Bank’s strong domestic and regional presence, combined with an asset base that spread over 30 countries and was well diversified over all sectors of the economy, had contributed to its rating.

Further, its modest market risk profile had shielded the bank from unfavourable market conditions, the report added.

It also highlighted the bank’s ability to absorb the loan loss provisions sustained on certain loan exposures through its strong core revenues that were generated in the form of interest and fee income.

According to the report, the bank had a proven track record of stable core earnings generated from its corporate banking and commercial operations, and had also shown an increasing growth in its retail and private banking earnings.

The report said that the bank’s optimal management of expenses had also helped it stay the course in these trying financial times.

To substantiate its rating of the bank, the report emphasised many of the bank’s strong financial ratios. Its liquid assets comprise more than 40 percent of its total assets. Its core deposits comprise more than 80 percent of the overall deposits.

The report said that these reflected the high level of stability and the solid funding base backing the ample liquidity that the bank enjoys.

Moody’s also underlined Arab Bank’s comfortable loan to deposit ratio of less than 70 percent, as well as its strong capital adequacy ratio of more than 16 percent, as calculated under Basel II, which exceed the prudential limits set by the regulatory authorities.

The report stressed that core liquidity continued to be an essential part of the bank’s strategic direction, even while its capitalisation remained very strong. This provided the bank with a cushion to absorb any unforeseen losses.

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