Islamic International Rating Agency (IIRA) has assigned international scale credit ratings to Gulf Finance House (GFH) at ‘BB’ (Double B) in the medium to long-term and at ‘B’ (Single B) in the short-term. On the national scale, ratings have been assessed at BB+/B (Double B Plus / Single B).
“Ratings derive strength from equity injections in 2013 as well as in 2014, resulting in considerably improved leverage indicators. Moreover, other steps taken towards financial reorganisation, including refinancing of a portion of debt with extended repayment period, also support ratings. Ratings also factor in the value of some of the key operative investments held by GFH.
“Slide in the value of investments made prior to 2008, in addition to delays in project execution timelines, had affected the institution’s franchise as well as its financial risk profile. After a phase of relative inactivity, the bank has resumed investments in new projects, though the pace of fresh business generation is cautious. Realignment of investment strategy to focus on smaller and relatively less risky projects, following the change in management and a much needed reassessment of the overall investment management process, has been factored into ratings assigned.
“Profitability position has benefited from one off transactions since 2010. Earning stream is likely to improve in line with growth in business activities, which are to be supported by additional funding available through equity infusion and plans to raise additional debt. However, innate to the business profile of the institution is a degree of instability in earnings and cash flows. IIRA has assessed the rating outlook for the institution as ‘Positive’ that hinges on developing a steady stream of core revenues and sustaining improvements to capital structure.
“The fiduciary score has been assessed in the range of ‘61-65’. While improvements in the bank’s governance framework have been observed in the recent past, certain weaknesses have been identified that need to be addressed. The fiduciary score is an aggregation of scores assigned to its three sub-sections, namely Corporate and Shari’ah Governance, and Asset Manager Quality.”
Originally published on www.cpifinancial.net