Jordan Islamic Bank’s ratings affirmed, on stable outlook
Capital Intelligence (CI), the international credit rating agency, announced 23 December 2013 that it has affirmed the Long and Short-Term Foreign Currency Ratings (FCRs) of Jordan Islamic Bank (JIB) at ‘BB-’ and ‘B’, respectively.
The Cyprus-based CI had recently lowered JIB’s and all the other Jordanian banks’ Long-Term FCRs to ‘BB-’ from ‘BB’, following the agency’s recent lowering of Jordan’s Sovereign Long-Term Foreign Currency Rating to ‘BB-’ from ‘BB’. Jordanian banks’ FCRs remain highly correlated with Jordan’s Sovereign Ratings how to lose weight fast. The Outlook for JIB’s FCRs remains ‘Stable’, in line with the Outlook for Jordan’s Sovereign FCRs.
The Bank’s Financial Strength Rating (FSR) is maintained at ‘BBB-’, on ‘Stable’ Outlook, in view of the improved loss-reserve cover for non-performing financings (NPFs), rebound in profitability, still comfortable liquidity, and JIB’s established Islamic banking franchise. The factors constraining the FSR are JIB’s lower than sector average total capital to total assets ratio, customer financing concentration risk, the challenging economic conditions and testing regional operating environment. The Support Level of ‘3’ is affirmed, on the basis of the high likelihood of support from the Central Bank in case of need, and from the parent Al-Baraka Banking Group in Bahrain.
JIB continues to control the lion’s share of Islamic banking assets and deposits in Jordan, despite keen competition following the entry of a number of other GCC-owned Islamic institutions over the past. The noticeably slower economic growth in Jordan, coupled with ongoing regional instability, has elevated credit risk in the local market and created a challenging operating environment for all banks as a group. Although this has translated into higher NPFs for JIB in recent years, as was also the case with conventional banks in Jordan, the Bank’s NPF ratio remains below the market average. Encouragingly, loss-reserve coverage for NPFs improved in the first half of 2013.
JIB’s profitability at both the operating and net levels recovered in 2012 and into H1 2013, mainly on the back of higher net profit sharing. The higher level of gross income generated was driven by the expanded financings portfolio. At the same time, the Bank’s gross income generation has improved significantly, and this lifted the proportion of gross income to average total assets to the sector average level. Although capital adequacy was comfortable and above the Central Bank of Jordan statutory requirement, JIB’s ratio of total capital to total assets remained below the average for the conventional banks in Jordan.
Established in 1978 under a special decree, JIB is the oldest Islamic bank in Jordan. The Bank is listed on the Amman Stock Exchange and 66% of its capital is held by Al-Baraka Banking Group, which in turn is owned by Saudi Arabia based Dallah Al-Baraka Group, a large diversified business conglomerate founded in 1969 by Sheikh Saleh Abdullah Kamel. JIB undertakes financing and investment through Islamic modes of Murabaha (cost plus profit margin), Mudaraba (the Bank shares profits as capital provider), Musharaka (participation investment) and Ijara (lease financing). The Bank operates a network of 64 branches, 15 cash offices and 123 ATMs in Jordan. At end-June 2013, the Bank had total assets of JOD3.1 billion (US $4.37 billion) and total capital of JOD236 million (US $332 million).