Fitch Ratings has affirmed Kuwait Finance House’s (KFH), long-term rating at ‘A+’ with a stable outlook. The rating confirms the confidence in KFH capability to fulfill its obligations yet emphasizes bank’s robust financial position, solvency, and the multiple revenue sources.
“KFH’s solvency is based on the strength of the brand, the pioneering position in the market, the geographical spread of the bank’s businesses, improvement in profitability and asset quality, and strong capital and liquidity” indicated Fitch Ratings in its report.
The report reiterated that KFH is a leader in the Islamic finance industry that is witnessing remarkable growth in terms of value and products volume. Despite the fact that the government is a shareholder, KFH attracts the greatest share of deposits in the market, mainly retail deposits. This puts the bank on solid ground due to clients’ confidence and government support.
The Kuwaiti banks benefit from a fairly stable operating environment. Fitch believes that the government’s capital spending plans will partially offset the pressures arising from the fall in oil prices. Several major projects have been awarded and financed in 2014 and 2015 which are providing growth opportunities for the sector.
Asset quality continues to improve across the bank, reflected in reducing volumes of non-performing finances. Reserves for non-performing finances are generally high, primarily due to the regulatory authorities’ instructions to build up precautionary general provisions. KFH has low levels of borrower concentration, making it less susceptible to event risk, and its funding profile is solid largely made up of retail deposits.
Fitch pointed that the growth and the bank’s on-going restructuring plans spur the appetite of continuing growth which reflects the bank’s positive performance and milestone success in line with set strategies.