FITCH assigns long-term rating of ‘BBB+’ Kuwait Finance House

Ratings, the international rating agency assigned a long-term, short-term, individual and support ratings to Kuwait Finance House (KFH) of ‘BBB+’, ‘F2’, ‘C’ and ‘2’ respectively. The rating outlook is stable.

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By  Massoud Derhally Published  December 11, 2002

Ratings, the international rating agency assigned a long-term, short-term, individual and support ratings to Kuwait Finance House (KFH) of ‘BBB+’, ‘F2’, ‘C’ and ‘2’ respectively. The rating outlook is stable.

The bank’s ratings reflect its strong domestic franchise, the bank’s shareholding structure, through which potential support would be forthcoming, together with consistently strong profitability, low cost funding and adequate capitalisation.

The bank enjoys a competitive advantage since it is the only Islamic bank operating in Kuwait. This gives the bank access to a set of unique customers who want to bank in accordance with Sharia’a principles.

These factors, said Fitch, are balanced by potential concerns over the proposed change in banking regulations which will permit other local commercial banks to offer Islamic banking services as a separate activity and relatively high exposure to property financing in a small market.

Performance has been stable over time and benefits from the bank’s Islamic principles whereby it has access to a strong customer deposit base. Asset quality is sound with relatively low levels of impaired loans and ample reserve coverage. Core lending activities are funded by a growing and stable customer deposit base and the bank remains adequately capitalised.

The Government of Kuwait holds a 45.54% shareholding in KFH, represented by the Kuwait Investment Authority (KIA) with 26.16%, the Public Authority for Minor Affairs with 10.69% and the Kuwait Awkaf Foundation with 8.69%. The remaining 54.46% is widely held by local investors.

As an Islamic bank the bank provides a broad range of products that comply with Islamic Sharia’a, with a dominant franchise in automobile, consumer durable and property financing. Operating through 27 local branches supported by a modern distribution network, KFH has built up a 20% market share of deposits and 19% share of loans.

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