Wednesday, August 4, 2010

MARC affirms Kuwait Finance House's ratings, outlook cut to negative

KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed Kuwait Finance House (Malaysia) Bhd's (KFHMB) long- and short-term financial institution ratings at AA+/MARC-1.

MARC said on Tuesday, Aug 3 the affirmation of KFHMB's ratings follows the affirmation of the long-term and short-term financial institution ratings of its parent, Kuwait Finance House K.S.C. at AAA/MARC-1.

KFHMB is rated one notch below KFH to reflect the strategic importance of the subsidiary to the parent bank as well as the common-branding that exists between the two institutions.

"MARC notes that KFHMB's dependence on parent support has risen as the bank's intrinsic financial strength has been visibly affected by asset quality challenges," it said.

MARC said the near term impact of the bank's weakened asset quality and operating performance on its capital adequacy was buffered by an injection of additional capital by KFH.

Meanwhile, KFH's affirmed ratings reflect its systemic importance to the Kuwaiti economy as the second largest bank in the country as well as indirect majority government ownership. In common with its subsidiary, KFH's key financial metrics have weakened relative to pre-2008 levels.

"Accordingly, MARC has revised the outlook on KFH's long-term rating to negative from developing. At the same time, KFHMB's long-term rating outlook has also been revised to negative from developing to reflect that of its parent," said the ratings agency.

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