Capital Intelligence Ratings (CI) in a statement has affirmed Jordan Islamic Bank’s (JIB) Long- and Short-Term Foreign Currency Ratings (FCRs) at BB- and B, respectively, with a stable outlook.
Reflecting JIB’s base of operations in Jordan and its exposure to the Jordanian sovereign in the form of balances at the Central Bank of Jordan (CBJ), as well as high exposure to a state-controlled entity, the FCRs are constrained by the ratings assigned to the sovereign (BB-/B/Stable). Accordingly, the Bank’s FCRs remain highly correlated with the sovereign’s creditworthiness.
The downgrade of the sovereign or any improvement in Jordan’s creditworthiness would have a corresponding effect on the bank’s FCRs. The Support Rating remains at ‘3’ in view of the demonstrated support from the parent, Al-Baraka Banking Group, as well as the high likelihood of support from CBJ if needed.
The bank’s Financial Strength Rating (FSR) is maintained at BBB-, with a ‘Stable’ Outlook. This rating is supported by the bank’s good and improved financing asset quality as demonstrated by the more than full and increased financing-loss reserve (FLR) cover for non-performing financings (NPFs), coupled with a still low NPF ratio and renegotiated financings, high liquidity (underpinned by a diversified customer deposit base), and good profitability at both the operating and net levels.
The bank’s established Islamic banking franchise in Jordan and high market share of Islamic banking assets and customer deposits is also a supporting factor. The FSR is constrained by the low total capital to total assets ratio, single large borrower concentration risk, the low share of non-profit sharing income (NPSI) to gross income, and the challenging operating environment, reflecting high credit and geopolitical risk factors (as is the case for all Jordanian banks).
JIB continues to control the majority of Islamic banking assets and customer deposits in Jordan, despite keen competition following the entry of a number of other GCC-based Islamic institutions over the past years.—Agencies