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S&P upgrades GIB's SACP profile, outlook
Published in The Saudi Gazette on 07 - 10 - 2013

The international credit rating agency Standard & Poors (S&P) has recently upgraded Gulf International Bank's (GIB) Stand Alone Credit Profile (SACP) to ‘BBB' from ‘BBB-‘ and it's rating outlook to Positive from Stable. The long-term and short-term issuer credit ratings were affirmed at ‘BBB+' / ‘A-2' respectively.

S&P explained in a public announcement that the ratings on GIB “… take into account the improvements we have observed in the bank's funding profile.
These improvements result from the bank's derisking strategy”. S&P continued “Over the last 18 months in particular, the average tenor and granularity of GIB's customer deposits increased while the bank's reliance on short-term wholesale funding sources decreased. This resulted in the revised assessment of the bank's funding profile to “average” from “below average” and subsequently its SACP to ‘BBB' from ‘BBB-'”.
S&P noted that a considerable portion of the bank's deposits are sourced from government-related entities, particularly from Saudi Arabian-based entities, which they consider to be more stable.
S&P commented that they viewed positively the bank's new strategy to transform its business model by establishing retail banking operations in Saudi Arabia and the rest of the GCC. S&P said “we consider that this will help diversify earnings and provide further funding stability”. The agency said that its rating assessment also derived from GIB's "very strong” capital and earnings, “adequate” risk position and “strong liquidity.”

Commenting on the upgrades in the SACP and rating outlook, Dr. Yahya A. Alyahya, GIB's Chief Executive Officer, said “This is a further independent validation of the actions taken over the last four years to restructure and transform the bank through the adoption of a new business strategy.”
Dr. Alyahya added “the upgrade of the SACP reflects S&P's assessment of GIB on a stand-alone basis without shareholder support and reflects an improvement in GIB's fundamental financial strength
“This follows the upgrade of the Fitch rating agency's Viability Rating from ‘BB+' to ‘BBB-‘ in March 2012. The upgrades in GIB's Fitch and S&P stand alone ratings reflect the rating agencies' confidence in the bank's operating strategy and the actions taken to implement a diversified business model,” he added. — SG


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