Moody’s

GCC Islamic banks to outperform their conventional peers

According to ratings agency Moody’s, Islamic banks across the GCC are expected to outperform their conventional peers in the year ahead. Credit fundamentals have improved due to better underwriting practices and higher profitability. Along with their strengthening franchise, GCC Islamic banks have achieved sustainable improvements in their credit risk profiles. Their cost of risk is expected to stabilise at current levels driven by improvements in asset quality and risk management practices. Whereas these banks had to incur high provisioning charges on their loans and investments in the past, these charges have fallen to levels below those of conventional peers. New investments in distribution channels and technology could add to the costs. GCC Islamic banks are still making considerable investments in building their branch network and technology because they are younger and are more focused on reaching retail customers.

GCC sovereigns, GREs to drive #sukuk supplies in 2018

Growth in global sukuk issuance is expected to remain muted this year although issuance volumes are likely stable. Moody’s Senior Analyst Nitish Bhojnagarwala expects sukuk issuances to remain broadly stable between $90-$100 billion in 2018, again driven largely by sovereigns. Although the financing needs of sovereigns, banks and corporates in the GCC have decreased in recent months due to higher oil prices, these issuers are expected to continue to support the industry. Sukuk market activity is also supported by specialised multilateral entities, such as quasi-sovereigns, central banks and supranational entities, including the Islamic Development Bank (IDB), the International Liquidity Management Corporation (IILM) and the Arab Petroleum Investments Corporation (APICORP). Moody’s estimate that total sovereign sukuk volumes will remain stable in 2018 although some of the large issuances in 2017 may not be repeated in 2018, driving a marginal decline in the overall value.

Shariah compliant finance is now nearly half of GCC banking market: Moody's

According to Moody’s, Islamic banking has grown in a decade from less than a third of the GCC banking market to account for 45% of the sector. Moody's senior analyst Nitish Bhojnagarwala said that growth in the Islamic finance sector would continue to outstrip that of conventional assets in coming years. In his view, growth will be supported by governments looking for diversification, as well as by continued demand for Islamic products from individuals. Another growth factor will be Islamic insurers' penetration into Southeast Asia and North Africa. Annual sukuk issuances have more than doubled to $100 billion from $42 billion from 2008 until September 2017. Moody's expects a similar level of activity in 2018.

QIIB high ratings by Moody’s, Fitch reflect #Qatar’s economic strength, says Al-Shaibei

QIIB announced that Moody’s and Fitch Ratings have affirmed its ratings at 'A2' and 'A' respectively. Moody’s said that its rating is based on several considerations, one of which is that the bank maintains high levels of liquidity and a strong capital base. Fitch explained that immediate risks from the diplomatic crisis to the bank’s overall standalone credit profile has reduced. The bank’s funding profile has generally stabilised from the back of outflows of nondomestic funding and the Qatari authorities have continued to provide funding support. QIIB's CEO Dr Abdulbasit Ahmad al-Shaibei said this strong rating was a confirmation of the strength of the Qatari economy and its ability to overcome various types of risks. He added that the ratings of Moody’s and Fitch proved that QIIB had a solid financial position, confirmed by its financial results, as in the third quarter of 2017, when the bank achieved a growth of 5.1%.

Moody’s: Prospects remain robust for Islamic finance despite subdued #sukuk issuance

According to Moody’s, the growth prospects for the Islamic finance sector are still strong despite new sukuk issuance remaining subdued this year. Moody’s global head of Islamic finance Khalid Howladar said growth in the Islamic banking sector continues to broadly outpace that of conventional banks in most systems in which Islamic banks have been established. The sector also has potential for further growth, especially in countries in which the penetration of Islamic banking assets remains relatively low, at between 5%-10% of Islamic financing assets. New sukuk issuance volumes in 2016 are expected to remain flat, at around US$70bil. Growth in the Takaful sector is also slowing, but the rating agency expects it to remain at double digit levels into 2017 and for gross contributions to reach US$20bil by next year.

#GCC’s Islamic banks have stronger liquidity profiles

Retail-focused Islamic banks in GCC countries have strong liquidity coverage ratios (LCRs) due to their large base of core retail customer deposits and low reliance on market-sensitive wholesale funding. According to Moody’s, retail deposits in 2015 comprised around 67% of Islamic banks’ customer deposits for the three GCC countries, compared to 40 for conventional banks. Islamic banks in GCC countries have become systemically important and continue to increase their market penetration, outpacing conventional banks. Sustained lower oil prices continue to reduce the flow of deposits and could lead to a gradual weakening of the LCR metrics for both Islamic and conventional banks.

Moody’s upgrades #ratings of Masraf Al Rayan

Moody’s has upgraded Masraf Al Rayan’s long term issuer ratings to A1 from A2. Counterparty Risk Assessment is changed to Aa3 from A1. The outlook on the long-term ratings has changed to stable from positive. The upgrade of Masraf Al Rayan’s ratings reflects continued business diversification as a result of growth and profitability of the UK subsidiary. Moody's expects these diversification trends to continue as the bank’s UK subsidiary grows further. The rating agency also expects that Masraf Al Rayan will maintain strong capital ratios, as healthy internal capital generation supports the needs of future asset growth.

#Moodys’ Raised Emaar #Sukuk to Baa3 and EIB Sukuk to A3

Highlights and Performance
Bloomberg Malaysia Sukuk
Bloomberg Malaysia Sukuk Ex-MYR Total Return and Dow Jones Sukuk Total Return indices ended relatively flat at 103.9 (+0.02%) and 159.8 +0.01%) respectively, with yields tightened marginally by 0.6bps to 2.470%. Combined with the Fed‘s dovish meeting (June 15), uncertainty over the Brexit referendum jitters (June 23) and mixed signals from China over slowing economy bring the risk-adverse sentiment. The top performers over the week were INDOIS 3/26 and GS 9/19, which moved -11bps to -13bps; while the underperformers were dominated by banking papers — EIB 1/17, Noor Bank B3T1 and DIB B2T1 which widened 12bps each.
Bank Indonesia
Bank Indonesia cuts key policy rates by 25bps in a surprise move, with the BI rate, deposit facility rate and 7-day reverse repo rate now stand at 6.50%, 4.50% and 5.25% respectively. In addition to the rate cut, BI also raised the minimum threshold on loan-to-funding ratio to 80% from 78%. Indonesia risk premiums widened 1.5bps to 196.0bps.

Barwa Bank sets up $2bn sukuk programme

Qatar’s Barwa Bank has established a $2bn sukuk issuance platform for the purchase of shariah compliant assets, according to Moody’s.
The rating agency has assigned a provisional rating of A2 to the programme, in line with its rating on the state controlled lender’s foreign currency deposits.
Trust certificates sold from the platform will be issued by a newly created Cayman Islands special purpose vehicle called BBG Sukuk Ltd and will

Source: 

http://www.globalcapital.com/article/vc8y20hfsvrm/barwa-bank-sets-up-$2bn-sukuk-programme

Maybank Islamic eyeing GCC for sukuk expansion

Maybank Islamic, is one of the leading arrangers of sukuk in the world, has viewed Gulf Cooperation Council, including Qatar, as its priority region in mobilising funds through Shariah-principled bonds.
“The GCC is definitely on our radar. It all depends on what kind of opportunities are available,” said Nor Shahrizan Sulaiman, deputy chief executive of Maybank Islamic, which is wholly-owned by Maybank Group with strong credit ratings from Standard & Poor’s and Moody’s.
The lender, a leading Islamic bank in the Asean region with assets to the tune of $42.65bn as on June 30, 2015, has a branch in Bahrain and a 30% stake in Anfaal Capital in Saudi Arabia.
Maybank is exploring opportunities in the Middle East through its stake in the Saudi Arabia’s Anfaal Capital. Almost 90% of the Maybank Islamic’s balance sheet is domestic and the remaining 10% is from overseas operations, according to Sulaiman.

Arcapita’ J.Jill suffers another ratings downgrade

Moody’s has downgraded Arcapita from B2 to B3 as the retailer’s sales stumbled and the significant leverage involved in the deal weighs on the company’s earnings. The outlook on the rating seems to be negative.
Moody’s re-rating comes after a similar downgrade from S&P in September, which dropped its rating on the loan from a B to a CCC with a negative outlook based on the risk that the company will breach its debt covenants.

Largest dual-tranche global sovereign US dollar sukuk

Clifford Chance advises on largest dual-tranche global sovereign US dollar sukuk
International law firm Clifford Chance has given advice to CIMB, Citi, HSBC and Maybank as joint lead managers and joint bookrunners on the US$2 billion dual-tranche sukukal- wakala transaction for the Government of Malaysia.
The sukuk certificates have been assigned a rating of A- by Standard and Poor’s and A3 by Moody’s.

Political tension ‘Credit Negative’ for Bahraini banks, says Moody’s

The agency says the political crisis in Bahrain escalated with the arrival of Gulf Cooperation Council (GCC) troops, a crackdown on anti-government protests, the arrest of opposition leaders, and the imposition of a 12-hour daily curfew. This increasing tension reinforces fears of prolonged political and economic uncertainty, which is likely to hurt the banks’ financial condition.
The ratings agency’s concerns for the system as a whole are partly mitigated by improved loan-to-deposit ratios and liquid asset levels compared with before the 2008 financial crisis, as banks cut back on new lending.

Political tension ‘Credit Negative’ for Bahraini banks, says Moody’s

The agency says the political crisis in Bahrain escalated with the arrival of Gulf Cooperation Council (GCC) troops, a crackdown on anti-government protests, the arrest of opposition leaders, and the imposition of a 12-hour daily curfew. This increasing tension reinforces fears of prolonged political and economic uncertainty, which is likely to hurt the banks’ financial condition.
The ratings agency’s concerns for the system as a whole are partly mitigated by improved loan-to-deposit ratios and liquid asset levels compared with before the 2008 financial crisis, as banks cut back on new lending.

International Borrowers Take to Islamic Bond Market

Until recently the issuance of Islamic bonds, or sukuk, was confined to the Muslim world. But now a number of international borrowers are tapping the markets, including Nomura Holdings in Japan and Europe's first corporate borrower, International Innovative Technologies.
The ratings agencies Moody’s and Standard & Poor’s say they expect to see a rise in the number of sukuk issues by new players over the next 12 months, including issues by borrowers in Singapore, Australia, Luxembourg, Thailand, Hong Kong, France and Russia.
While the Islamic Financial Service Board and the accounting and auditing organization have defined standards for sukuk, defaults over the past year have shown that new guidelines must be set as problems arise, particularly as sukuk start to generate global attention.

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