KUWAIT CITY, March 22: Fitch Ratings, the international credit rating agency, said that NBK is the flagship bank in the Kuwaiti banking sector and measures up to leading regional banks. The bank enjoys a dominant market share in Kuwait and is widely thought of as one of the region’s strongest franchises.
Earlier, Fitch affirmed NBK Long-term Issuer Default Rating (IDR) at ‘AA-’, the highest in the Middle East and North Africa, with a Stable Outlook.
In its report published recently, Fitch Ratings said: “It is difficult to compare NBK with domestic peers, due to the dominance of the bank’s domestic franchise and superior diversification”. The agency added: “We therefore view NBK’s closest peers as other leading GCC banks that are flagship banks within their domicile.”
“NBK’s company profile is underpinned by its status and dominant franchise in Kuwait. The bank has a more diverse business model than peers, which includes regional and international operations, a leading capital markets subsidiary and a majority stake in a domestic Islamic Bank”, Fitch said.
Diverse business model
Fitch affirmed that NBK’s business model is significantly more diverse than peers, geographically and by activity. More importantly, in Fitch’s view, is the diversification that NBK has achieved domestically. Its acquisition of Boubyan means that NBK is the only bank in Kuwait to offer both conventional and Islamic banking. The acquisition has brought synergies and expanded the bank’s customer base. From a low base, Boubyan is growing rapidly and performance has improved markedly. Income is further diversified by the bank’s strong capital markets division and stable earnings from the bank’s treasury function. Fitch sees this increased diversification over peers as a major contributor to the bank’s sound and stable earnings base.
Fitch considers that NBK has one of the strongest management teams within the Kuwaiti Banking sector with a good mix of experienced locals and expatriates. Management has a high degree of depth and stability, and succession planning has been well managed.
Fitch highlighted that NBK has implemented its conservative strategy effectively over a sustained period. The bank has successfully diversified within Kuwait on its entry into Islamic Banking and its main focus is now on organic growth. Fitch does not see any major strategic changes as a result of the new senior management team, who have been with the bank for a long period.
Fitch also said that “NBK has a strong track record of execution over a sustained time period. Financial metrics have remained sound and above peers for a significant period, particularly with respect to profitability and asset quality. The bank’s strategy of diversification has largely been successful.”
NBK enjoys the highest credit ratings by the major international rating agencies: Moody’s, Standard & Poor’s and Fitch Ratings. In their latest reports, the three rating agencies affirmed NBK’s credit ratings with a stable outlook. NBK also maintains its position among the 50 safest banks in the world for the ninth time in a row.