Capital Intelligence (CI), the international credit rating agency based in Cyprus, revised (29 July 2015) the Outlook on the Long-Term Foreign Currency Rating (FCR) of Export Development Bank of Iran (EDBI) to ‘Positive’ from ‘Stable’. The rating action follows the recent change of Outlook on Iran’s sovereign Long-Term FCR of ‘B’ from ‘Stable’ to ‘Positive’, following the agreement that was reached between Iran and the P5+1 group of six world powers on 14th July 2015.
EDBI’s Long- and Short-Term FCRs were both affirmed at ‘B’ and remain constrained by the sovereign FCRs. Despite its role as a policy bank, EDBI’s Support Rating is affirmed at ‘4’ which at the current level of sovereign ratings implies only a moderate level of support for EDBI by the Iranian government.
At the same time, CI affirmed EDBI’s Financial Strength Rating (FSR) of ‘BB-’ on a ‘Stable’ Outlook, reflecting the Bank’s strong capital adequacy, its privileged access to low cost funding due to its official policy role, its well managed cost base and improved asset quality metrics. Contingent impairments and un-provided non-performing financings remain important caveats regarding capital. The limitation as to asset quality is that the underlying credit risk on buyer credits (which are now not being insured as a general rule) may well lead to weaker asset quality (and therefore a higher risk profile for the Bank).
Despite the recent agreement, CI said it expects that the operating environment will remain very difficult until significant easing of sanctions has taken place and will therefore continue to constrain the FSR for some time. Although conventional liquidity ratios are sound, the amount of usable liquid assets remains low. Concurrently, the high level of contingent commitments also constrains the FSR as they could tighten both liquidity, as well as capital ratios if drawn before new funding from official sources is made available. High borrower concentration remains a feature of the Bank’s financing portfolio and also constrains the FSR.
EDBI has headquarters in Tehran and reported total assets of IRR154 trillion (US $5.8 billion) and equity of IRR42 trillion (US $1.6 billion) at end-September 2014.