Mubasher: Moody's Investors Service has affirmed Kuwait Finance House’s (KFH) long- and short-term domestic and foreign currency deposit ratings at ‘A1’ and ‘Prime-1’, respectively.
The rating agency has also upgraded KFH's baseline credit assessment (BCA) and adjusted BCA to ‘baa3’ from ‘ba1’.
The outlook on KFH's long-term ratings remains stable, according to a press release by Moody’s on Monday.
The rating agency clarified that the upgrade of KFH's BCA reflects sustained improvements in the Kuwaiti bank's asset quality and earnings.
Moody’s noted that the affirmation of the bank’s deposit ratings reflects the expectation of a very high probability of government support when needed.
“KFH's five notches reflect the bank's systemic importance in Kuwait, given its domestic market share of around 24%, and its large retail deposit base and global Islamic banking franchise; its aggregate 48% direct and indirect ownership by various Kuwaiti government entities which is the highest in Kuwait; and Kuwaiti authorities' long track record of transparency surrounding the provision of support to distressed banks,” according to Moody’s press release.
The upgrade of the BCA reflects Moody's view that the asset quality improvements are expected to be sustained, as well as the improved earnings quality and profitability due to ongoing divestment of legacy exposures.
Moody’s also noted that this upgrade also takes into account the solid capital and liquidity buffers of KFH.
“The long-term ratings of KFH will continue to have a stable outlook. The stable outlook reflects the bank's robust capitalisation and liquidity, counterbalanced by sector concentration and weaker operating conditions in some geographies where the bank operates in,” Moody’s said.
