UAE’s Investbank upgraded

Capital Intelligence, the international emerging markets rating agency, announced on April 27 that it had increased the foreign currency long-term rating of United Arab Emirates’ Investbank to BB+ from BB in view of the overall improvement in the bank’s financial position, which appears to be sustainable.

The outlook reverts to ‘Stable’ from ‘Positive’, while other ratings are unchanged. The ratings are constrained by the weaker liquidity ratios, and the relatively small size of the balance sheet.

Diversification underpinned performance

Investbank’s strategies focusing on income and portfolio diversification, upgrading technology and strengthening risk management underpinned its good performance last year, said Capital Intelligence.

Fewer bad debts were classified as compared to the previous year, and provision levels have increased. The credit book is now more diversified and the qualitative improvements made over the last four years should help the bank through the next downturn.

“It is hoped that Investbank will continue to build its provisions during the current boom period when profits are strong and rising” said the agency.

“In addition, asset classification norms need to be strengthened beyond the minimum guidelines of the central bank.”

CI said that the bank enjoys robust profitability owing to good interest and non-interest earnings and a relatively low operating cost base. It is well capitalised.

Liquidity levels tightened further last year partly due to year-end fluctuations in time deposits. The higher capital base and unused lines of credit from correspondent banks provide additional liquidity support.

Nevertheless, future asset expansion will depend on stronger customer deposit collections.