RAM Ratings reaffirms Gulf International Bank’s ratings

Published on 16 July 2013

RAM Ratings has reaffirmed the AA1/Stable/P1 financial institution ratings of Gulf International Bank BSC (“GIB” or “the Bank”) and the AA1(s)/Stable rating of the proposed up to RM3.5 billion Sukuk Wakalah Medium-Term Note Programme of Gulf Sukuk I Company BSC (C) (“Gulf Sukuk”). Gulf Sukuk is the funding conduit for GIB and the issue rating reflects the Bank’s credit strength given its obligations under the Purchase Undertaking.

GIB is a wholesale bank that enjoys an established franchise within the Gulf Cooperation Council (“GCC”). The Bank’s ratings incorporate expectations of strong financial support, if needed, from its ultimate major shareholder - the government of Saudi Arabia, which indirectly owns 97% of GIB. The government’s support has been proven through capital injections and its past purchase of the Bank’s non-core securities. 

As part of its aspirations towards becoming a pan-GCC universal bank, GIB is expanding into the mid-cap corporate segment and retail banking. While recognising the merits of this transformation, we also note that this is uncharted territory for the Bank. Nonetheless, GIB’s asset quality has stabilised after the deterioration in the wake of the global financial crisis; its adjusted gross impaired-loan (“GIL”) ratio had improved to 10.8% as at end-December 2012, from 12.5% a year earlier, albeit still deemed high. On this note, 45% of the Bank’s adjusted GILs are restructured loans on which payments have been prompt based on revised terms. With sufficient impairment provisions already set aside, the Bank’s credit-cost ratio has been low since fiscal 2010, and is likely to remain so in the near term.

GIB’s funding base exhibits substantial depositor concentration and some reliance on wholesale funding; the latter is utilised to achieve better maturity matching of its assets and liabilities. However, these risks are moderated by the Bank’s healthy liquidity profile and large holdings of investment-grade debt securities. In the meantime, its robust capitalisation provides a solid buffer against potential challenges to its asset quality. As at end-December 2012, its Basel III common-equity tier-1 ratio came up to a high 14.2%.

Media contact

Lim Yu Cheng

(603) 7628 1188

yucheng@ram.com.my