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Fitch cuts Kuwait’s KFH, warns it may act again

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Points of Essence:

  • The giant of the Middle East is cooled down by a downgrade from Fitch.  Attributed by its heavy exposures to the Kuwaiti troubled investment companies as well as the political standoff in the state owned banking conglomerate had its impact on the future growth of the bank. Fitch is watching this development with great concern and thus warn for yet another rating cut. Reuters has the story.

KUWAIT, April 1 (Reuters) – Fitch Ratings has cut Kuwait Finance House (KFH), the country’s biggest Islamic lender, due to exposure to the Gulf Arab state’s troubled investment firms, it said on Wednesday.

The move is the latest cut by agencies for Kuwaiti lenders, mainly due to risks in having given loans to the troubled sector of investment firms, of which several have said they need fresh funds or have to sell assets to weather a financial crisis.

Fitch said it cut KFH’s individual rating to “C/D” from “C” and said it may further downgrade the major Gulf Islamic lender after its first-half earnings, according to a statement on Wednesday.

“The bank is highly exposed to Kuwait’s distressed investment companies, which contributed in part to the bank’s significantly higher loan imparment provisions and impaired loans for 2008,” Fitch said in a statement.

In addition, Fitch said KFH was also strongly exposed to Kuwait’s real estate market and local stock market which has fallen about 60 percent since summer.

It kept KFH’s long-term issuer default rating at “A+” and short-term rating at “F1,” saying that there was a high probability that the bank would get government support if needed.

In October, the OPEC member stepped in to save Gulf Bank after having been hit by losses worth $1.4 billion from derivatives deals.

Moody’s warned last month it may for the first time cut Kuwait due to a political standoff hitting its ability to deal with the global crisis. (Reporting by Ulf Laessing; editing by Diane Craft)



Written by Suapi Shaffaii

April 4, 2009 at 1:24 am

Posted in General Issue

Tagged with , ,

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