x Abu Dhabi, UAEWednesday 26 July 2017

Heavy loss results in credit rating cut for Kuwaiti bank

Commercial Bank of Kuwait, Kuwait's fifth-largest lender by assets, had its credit rating cut yesterday after a multimillion dollar loss in the third quarter.

Kuwait's fifth-largest lender by assets had its credit rating cut yesterday after a multimillion-dollar loss in the third quarter.

Commercial Bank of Kuwait's (CBK) local and foreign-currency deposit ratings were lowered to A3 from A2, said Moody's Investors Service. A3 is the fourth-lowest investment grade at the agency.

"[The] rating action is [mainly due to] the ongoing pressure on Commercial Bank of Kuwait's asset quality, primarily driven by its high exposure to the construction and real estate and investment sectors," the Moody's analysts Stathis Kyriakides and Yves Lemay said yesterday.

Profitability will remain under pressure "at least into the first half of 2013 as provisioning needs remain high", they said.

CBK posted a loss of US$44.7 million (Dh164.1m) in the third quarter as impairment charges climbed 80 per cent from a year earlier to 34.8m Kuwaiti dinars (Dh453.7m). The bank expects credit growth to remain constrained on reduced demand from companies, Nuhad Saliba, the chief executive, said last month.

The bank's outlook was raised to stable.

The stable outlook is based on CBK's "adequate capitalisation, solid liquidity and stable funding base", which Moody's expects will counterbalance the impact of further asset-quality and profitability pressures, according to the agency's research note yesterday.

The ratings company said it did not currently expect further downward pressure on the rankings.

CBK shares have declined 18 per cent this year compared with a gain of 1.9 per cent for the benchmark KSE Index.

Also yesterday, Kuwait reappointed Mustafa Al Shimali as finance minister, almost seven months after he resigned following questioning over alleged financial irregularities at institutions under his authority by the dissolved opposition-dominated parliament. He denied all the accusations.

Hani Hussein, the former oil minister, was also reappointed to that post in the new government line-up announced yesterday.

business@thenational.ae

* with agencies