MARC Affirms Islamic Development Bank's Financial Institution Ratings at AAA/MARC-1 and its RM400 Million Issue Rating Via Tadamun Services at AAAIS
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MARC Affirms Islamic Development Bank's Financial Institution Ratings at AAA/MARC-1 and its RM400 Million Issue Rating Via Tadamun Services at AAAIS
Islam, Mal, Sukuk
Islam, Mal, Sukuk
Organisation Tags (3)
IsDB - Islamic Development Bank
Malaysian Rating Corporation Berhad
Bank Negara Malaysia
Transcription
- IB Press Release Service Published on : IslamicBanker.com Publications: https://www.islamicmarkets.com/publications MARC Affirms Islamic Development Bank's Financial Institution Ratings At AAA/MARC-1 and its RM400 Million Issue Rating Via Tadamun Services at AAAIS 15 August 2017 MARC has affirmed its long- and short-term financial institution (FI) ratings of AAA and MARC-1 respectively on Islamic Development Bank (IsDB). Concurrently, the rating agency affirmed its AAAIS rating on the Sukuk Wakalah programme of up to RM400 million issued by Tadamun Services Berhad (Tadamun), a trust established by IsDB for the purpose of issuing the sukuk. The outlook on the ratings is stable. The ratings are based on the Malaysian national scale. .The affirmed FI ratings continue to be premised on IsDB's strong capital and liquidity position, its strong shareholding structure, and preferred creditor status that mitigates sovereign risk. IsDB remains well supported by its shareholders since its establishment as a multilateral development bank (MDB) in 1975 by the Organisation of Islamic Cooperation (OIC) to facilitate economic development of OIC member countries. Of its shareholders, Saudi Arabia, Kuwait, Qatar and the United Arab Emirates (UAE) have a combined stake of 45% in IsDB. IsDB's capital, as reflected by an equity-to-asset ratio of 45.9% as at end-2016, remains strong and compares favourably with many MDBs. The bank's members' equity stood at Islamic Dinar (ID) 8.3 billion as at end-December 2016, up from ID7.8 billion as at October 13, 2015. The growth in members' equity was due mainly to an increase in retained earnings of ID185.1 million and paid-up capital of ID203.4 million during the financial period ended December 31, 2016 (FP2016). MARC notes that the bank maintains a prudent policy of restricting earnings distribution until general reserves attain 25% of subscribed capital; as at end-2016, this stood at 4.9%. The bank's shareholders have demonstrated their commitment to provide capital not only to support IsDB's operational growth but also maintain a strong capital base. As at end-December 2016, the bank's total subscribed capital stood at ID50.1 billion, of which callable capital was ID40.7 billion and ''called-up but not yet due'' capital was ID4.0 billion. The latter will be paid up by member countries over the next 19 years and is expected to boost IsDB's paid-up capital by about ID200 million annually. MARC notes that while there has been delay in payments from some shareholders, overdues remained low, accounting for 2.5% of members' equity or ID209.5 million as at end-2016 (October 13, 2015: ID135.6 million; 1.7%). A significant portion of
- IB Press Release Service Published on : IslamicBanker.com Publications: https://www.islamicmarkets.com/publications committed capital is from OIC member countries rated in the A and above category on the global rating scale. MARC observes that during FP2016, the bank issued a total of ID2.3 billion sukuk to support lending operations, resulting in its leverage ratio increasing to 114.2% from 101.8% as at end-October 2015. The increase in sukuk issuance to finance its operations is also partly to support the growth of the global sukuk market. Nonetheless, the leverage level remained below its internal cap of 125% and is sharply lower than some of its peers. The bank's liquidity position remained sound with liquid assets-to-total borrowings standing at 47.9% (October 2015: 47.4%). For FP2016, IsDB's total gross financing grew at a steady pace of 10.4% to ID12.7 billion (2015: 10.0%), mainly driven by financing for agriculture and infrastructure projects, particularly in Asia and Africa. IsDB remains in compliance with its self-imposed single country exposure limit of 15% on its financing and investments to mitigate concentration risk. The bank's three largest country exposures are in Turkey (10.8%), Pakistan (8.7%) and Morocco (6.7%). Given its developmental objectives to foster economic growth, IsDB is exposed to the credit risk of sovereigns with weak credit profiles. As at end-2016, 81.0% of the bank's top 20 exposures are to unrated and non-investment grade countries. This notwithstanding, MARC draws comfort from IsDB's preferred creditor status which provides the bank with a priority of claim over other creditors in the event of a sovereign default. As at end-2016, IsDB's overdue instalments stood at 1.0% of total financing, with full provisions made on overdues of six months. As at date, the bank has never reported a write-off on sovereign exposures since the commencement of operations. The stable rating outlook reflects MARC's expectations that IsDB will maintain its strong capitalisation and liquidity profile, and that the bank's member countries will continue to extend strong support. Organisation Name: News Type: Malaysian Rating Corporation Berhad (MARC) RATING ANNOUNCEMENT Source: BNM Announcements Media Contact Afeeq Amiri, +603-2717 2956/ afeeqamiri@marc.com.my; Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my
- IB Press Release Service Published on : IslamicBanker.com Publications: https://www.islamicmarkets.com/publications Disclaimer: This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.
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