The award-winning UAE InvestBank has had its ratings affirmed by Capital Intelligence (CI), the international credit rating agency based in Cyprus.
CI Ratings announced 22 July 2015 that it has affirmed the Financial Strength Rating of the UAE’s Invest bank (IB) at ‘BBB’ with its solid capital adequacy ratio (CAR), good profitability, high loan-loss reserve coverage and sound net loans to stable funds ratio being supporting factors.
The constraining factors are the bank’s small balance sheet size, high customer concentration in the deposit base, sector concentration in construction, and a continuing high level of latent credit risks in an otherwise improving operating environment. The Foreign Currency (FC) Ratings are maintained at ‘BBB’ Long-Term and ‘A3’ Short-Term. The FC Ratings are underpinned by the support of the federal government and the bank’s moderately good financials overall. The Support Rating is maintained at ‘3’ indicating a high likelihood of support from the government in case of need.
A ‘Stable’ Outlook is assigned to all the ratings. IB’s asset quality ratios improved in 2014 and Q1 2015, and the loan-loss reserve coverage ratio is currently strong. However, despite falling in both of those periods, the non-performing loans ratio remains higher than the peer group average. The bank’s large capital base provides additional cover. The Bank has a low level of renegotiated loans.
Its performing loans are substantially covered by collateral, which has a large cash component. The CAR has been solid for many years, and although the ratio declined in 2014 owing to the strong growth in risk-weighted assets, it was still at a solid level.
The bank’s liquidity ratios are good overall. Customer deposits and capital fund the bulk of the balance sheet and interbank liabilities are very low. The net loans to stable funds ratio was sound at end 2014. IB continues to have money market lines from local and foreign banks, which have been used very sparingly so far. The bank has small maturity gaps reflecting the high level of short-term loans on its balance sheet.
Liquid and quasi-liquid assets are at satisfactory levels. Notwithstanding the declining trend in IB’s operating profitability and ROAA (return on average assets) in recent years, key profitability ratios remain strong, underpinned by a wide net interest margin, a good non-interest income base and low operating costs.
The bank’s profitability ratios have been consistently strong and well above the peer group average for many years. IB was incorporated in the emirate of Sharjah in 1975. Its principal shareholders are businessmen from Sharjah and Abu Dhabi. With total assets of AED13 billion at end 2014, it ranks among the smaller banks in the country. The bulk of its customers are small and medium-sized companies, although with the growth of the bank’s capital it is increasingly in a position to reach out to some of the larger companies as well.
Contractor and trade finance and loans to manufacturing companies are important corporate banking activities.