Fitch affirms Kuwait's Global Investment House at IDR 'BBB'; outlook stable

It has also affirmed the Support Rating Floor at 'No Floor'. Fitch has also assigned Global a Long term local currency IDR of 'BBB' with Stable Outlook and its KWD50m fixed/floating-rate notes due 2013 an expected Long-term local currency rating of 'BBB'. The final rating on the notes is contingent on the receipt of final documentations conforming materially to information already received.

The Long and Short-term IDRs and Individual rating reflect Global's growing franchise in regional corporate finance and asset management (albeit currently concentrated in Kuwait), good profitability, a sound capital base and good cost efficiency. They also reflect substantial exposure to market risk on equity investments and the resulting potential for volatile earnings, reliance on short-term borrowing and sensitivity to the regional economy and stock markets. Although regulated by the Central Bank of Kuwait, Global is not a fully licensed bank, but an investment company. As such, in Fitch's opinion support from the authorities if Global were in difficulties, is considered possible, but cannot be relied upon. Support from its core shareholders might also be possible, but the extent of such support cannot be verified.

Upside potential for Global's ratings is currently limited given its risk profile. Downside potential could arise from the failure to lengthen the company's funding or to adequately manage the risks associated with Global's rapid expansion plans. Any deterioration in the economic environment or regional stock markets to such an extent that they have an adverse impact on the company's performance would also be negative for the ratings.

In 2008 Global's equity more than doubled to KWD690.8m, following a share issue (USD1.1bn) plus retained earnings, and at end-H108 the company had a Tier 1 ratio of 34%. Global will use the funds to continue to grow in the Gulf Cooperation Council (GCC) and Middle East and North Africa (MENA) regions, acquiring investment banking, asset management and brokerage licences, co-investing in the company's managed funds and potentially acquiring a GCC-focussed asset management company or commercial bank. In 2007 Global was granted a licence by the Capital Market Authority of Saudi Arabia to establish a full-service investment banking and asset management business. The company aims to expand its employee base in Saudi Arabia from 25 staff to 100 by the end of 2008. Fitch considers the growth plans to be ambitious given the competitive banking environment in Saudi Arabia.

Global's net income increased 27% yoy in 2007 to KWD92.2m, driven by gains from exiting private-equity investments and higher trading income. Strong performance continued into H108, with net income rising 75% yoy, driven by growth in investment banking and advisory fees, realised and unrealised gains on investments and gains from the disposal of investment properties. At end-H108 Assets under Management stood at $9.4bn.

Global was established in 1998 in Kuwait and was listed on the Kuwaiti Stock Exchange in May 2003. It has since also listed on the stock exchanges in Bahrain, Dubai and London. Global offers a broad range of financial products and services, including corporate finance, private equity, investment funds, brokerage and research, focusing on local, regional and international clients and promoting investment opportunities, primarily within the Gulf and elsewhere in the Middle East.

Global's main shareholders are the Public Institution for Social Security (Kuwait, 10.2%) and Dubai Investment Group (an investment vehicle of the Dubai ruling family, 10.4%).