Download IIRA Reaffirms Ratings of Kuveyt Turk Participation Bank

IIRA Reaffirms Ratings of Kuveyt Turk Participation Bank
Manama, December 22, 2015 – Islamic International Rating Agency (IIRA) has reaffirmed the ratings of Kuveyt Turk Participation Bank (KTPB) at ‘AA(tr)/A1+(tr)’ (Double A / A One Plus) on the national scale. Ratings on the international scale have also been reaffirmed, with foreign currency rating at ‘BBB‐/A3’ (Triple B Minus / A Three) and the local currency rating at ‘BBB/A3’ (Triple B / A Three). Outlook on the assigned ratings is ‘Stable’. The assigned ratings take into account KTPB’s sound financial risk profile, against the backdrop of continued business expansion. The bank has emerged as the largest participation bank and the twelfth largest banking institution in the country. Growth has been backed by sustained asset quality indicators and sufficient capitalization and liquidity buffers. Overall profitability position is also healthy; however, efficiency indicators have lagged behind larger players, given a larger cost base, relatable to aggressive expansion in delivery network. KTPB’s ratings are also underpinned by strong institutional ownership and the financial support extended by these sponsors historically. The bank’s sponsors are sovereign owned entities having substantial financial muscle, with Kuwait Finance House being the lead promoter and other shareholders including the General Directorate of Foundations – Republic of Turkey, Islamic Development Bank, and Kuwait Public Institution for Social Security. Turkey’s banking sector has so far depicted resilience to the impact of regional instability. However, developments in this regard will be closely tracked for any potential adverse impact on the banking sector. Changing competitive landscape within the participation banking domain may also pose challenges to maintain growth indicators. KTPB’s foray into the European market (Germany) represents a significant opportunity, which may help the bank achieve business diversification over the long term. The pension fund and life insurance joint‐venture entity established in 2014 is also likely to add value, going forward. For further information on this rating announcement, please contact Raza Lakhani, CFA at [email protected] or undersigned at [email protected]. Sabeen Saleem, CFA Chief Executive Officer The information contained herein is obtained by IIRA from sources believed to be accurate and reliable. IIRA does not audit or verify the truth or accuracy of any such information. As a result, the information herein is provided "as is" without any representation or warranty of any kind. IIRA, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s) / score(s) mentioned. Rating is an opinion and not a warranty of a rated entity's current or future ability to meet contractual obligations, nor it is a recommendation to buy, sell or hold any security.