CI: Arab Tunisian Bank ratings affirmed
Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, today announced it has affirmed the ratings of Arab Tunisian Bank (ATB), based in Tunis, Tunisia. ATB’s Financial Strength Rating (FSR) is maintained at ‘BB+’.
The FSR is supported by the Bank’s adequate liquidity, relatively sound loan asset quality, and reasonable profitability. The rating is constrained by the level of non-performing loans (NPLs), weak customer deposit growth, together with the difficult operating conditions, and a challenging banking sector. Any deterioration in ATB’s key financial metrics is likely to see downward pressure on the FSR. ATB’s Long- and Short-Term Foreign Currency Ratings (FCRs) are affirmed at ‘BB’ and ‘B’, respectively and are at the level of CI Ratings’ internal assessment of sovereign credit risk for Tunisia. The Outlook for all ratings is affirmed at ‘Stable’. The Support Rating is maintained at ‘3’ due to Arab Bank of Jordan ownership. Support from Arab Bank would be expected to be forthcoming if needed.
ATB holds a sound franchise in the Tunisian banking sector, controlling around eight per cent of total assets. It has recorded consistently sound performance for many years, supported by its conservative balance sheet strategy, which sees higher liquidity than peer banks. Its loan asset quality is much better than most peer banks with ATB’s NPLs at around one half of the sector’s NPL ratio. However, its ratio is still quite high, although NPLs fell in actual stock for the first six months of 2017 and coverage was solid.
ATB’s main advantage is its relatively sound level of liquidity, with the Bank holding a good level of liquid assets. The Bank’s balance sheet contains a relatively large portfolio of Tunisian Treasury paper and other liquid assets, with ATB’s loans forming a lower proportion of total assets than many peer banks in Tunisia. Funding is provided mainly by customer deposits. However, customer deposits declined in H1 2017 and growth in 2016 was modest, underlying the challenging market. ATB’s loan-based liquidity ratios tightened to end June 2017. Liquidity is still very tight for most Tunisian banks and the sector overall. As is the case for all peer banks, ATB also sources Central Bank of Tunisia funding facilities due to the shallowness of the deposit market in Tunisia. The Bank’s profitability weakened slightly in 2016 due to modest growth in gross income, higher operating expenses, and an increased cost of risk.
ATB was established in June 1982 as the locally-incorporated successor to the Tunis branch of Arab Bank PLC, which had operated in the country since 1952. The Jordan-based parent holds 64 per cent of the equity of the Bank and private Tunisian investors hold the remainder. With assets amounting to TND5,902 million(the equivalent of $2,427mn) at end June 2017, ATB is a medium-sized bank operating in the domestic banking sector.