By the same action, Moody's has also upgraded the bank's foreign currency deposit rating from
A2 to A1 with a stable outlook.
The upgrading of the bank's FSR from D to D+ reflects the ongoing improvement in BKME's financials, comfortable liquidity, solid capital levels and strong asset quality despite a marginal deterioration during 2005. During 2005, BKME's profitability indicators surged, closing the gap with other Kuwaiti banks of similar size. It is understood that the substantial improvement in the bank's profitability during 2005 was largely due to exceptional, and possibly non-recurring gains recorded by BKME's consolidated asset management and financial services subsidiary (KMEFIC) on the back of the stellar performance of regional stock exchanges during the year. Despite the correction in regional stock markets in the first half of 2006 and a material drop in the group's trading income, BKME reports that it succeeded in maintaining profitability at levels similar to those of 2005 due to good growth in interest income, suggesting that the bank's core profitability is improving. Nevertheless, its efficiency ratios -- though acceptable by international standards -- are weaker than those of other Kuwaiti banks.
Following the acquisition of a controlling stake by Ahli United Bank of Bahrain (AUB) the new management team launched a far-reaching restructuring project. Under this programme IT infrastructure has been upgraded, risk management processes have been enhanced, and a major re-branding exercise seeking to expand BKME's reach within the retail banking market has been undertaken.
As with all Kuwaiti banks of similar size, industry concentrations may restrict further upward movement of BKME's FSR. Related-party lending is high at around 20% of equity, but is a much smaller proportion of total group equity and meets all regulatory requirements.
Moody's decision to upgrade BKME's foreign currency deposit rating follows the recent similar action on Kuwait's long-term foreign currency bank deposit ceiling and concludes the review for upgrade of the bank's foreign currency deposit rating. Moody's explains that the A1 long-term foreign currency deposit rating assigned to BKME Bank reflects both the bank's intrinsic financial strength, as well as its importance to the domestic banking system. Moody's believes that BKME would be highly likely to receive support from the Kuwaiti government in the unlikely event of need, resulting in a deposit rating that is substantially higher than would normally be attributed to a D+ rated institution in the absence of such support.
Headquartered in Kuwait City, BKME reported total assets of KWD1.814 billion (USD6.242 billion) as of 30 June 2006.
Moody's upgrades Bank of Kuwait and the Middle East's ratings
Moody's Investors Service has upgraded the financial strength rating (FSR) of Kuwait's Bank of Kuwait and the Middle East (BKME) from D to D+ with a stable outlook.
- Kuwait: Tuesday, November 07 - 2006 at 11:02
- PRESS RELEASE
Index : Company News : Moody's
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This Article was updated on Wednesday, February 28 - 2007
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