Fitch explained in a public statement that it has upgraded GIB’s Viability Rating to reflect the “significant improvement to the Bank’s risk profile from restructuring, de-risking and de-leveraging initiatives” taken in the past few years. Fitch also commented that GIB’s “balance sheet has been transformed.” GIB returned to profit in 2010, and its performance continues to improve, with net income for 2011 rising to US$105 million. The Viability Rating represents an evaluation of the bank on a standalone basis excluding shareholder support.
“GIB has a strong liquidity position…even without relying on its large investment portfolio which provides a sizable liquidity buffer.” They noted that GIB’s funding and liquidity position had strengthened with improving term structure in wholesale funding. The Bank had raised longer-term debt during 2011 at a relatively low cost, leveraging its shareholders’ support. This has enabled the Bank to improve asset-liability mismatches and reduce its reliance on expensive short-term funding. Moreover, customer deposits had grown, with GCC governments and government-related entities being major depositors in the Bank.
Fitch also referred in its statement to GIB’s strong capitalisation, providing a good buffer as the Bank ventures into new markets and products.
“Fitch expects GIB to build a much stronger and broader franchise over the near term, which ultimately safeguards its future. Fitch also stated that they were of the view that the Bank’s new universal banking strategy is credible and that retail banking opportunities are available in the planned target markets.
“This is regarded as an independent validation of the actions taken over the last three years to restructure the Bank as well as our new business strategy,” Dr. Yahya A. Alyahya, GIB’s Chief Executive Officer, said.
“The upgrade of the Viability Rating reflects Fitch’s assessment of GIB on a standalone basis without shareholder support and reflects an improvement in GIB’s fundamental financial strength and risk profile. This is particularly pleasing as it represents one of very few bank rating upgrades since the financial crisis of 2007/2008.”
GIB is a leading bank in the Middle East with its principal focus on the GCC states. Its primary shareholder is the Public Investment Fund of Saudi Arabia.