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DUBAI: �ѴǴǻ��’s Investors Service has upgraded Dubai Islamic Bank’s (DIB) local and foreign currency long-term issuer ratings to A3 from Baa1 changed its outlook for the bank has been changed to stable from positive.
The ratings agency also upgraded the bank’s baseline credit assessment (BCA), adjusted BCA as well as the long and short-term counterparty risk assessment.
The primary driver for the BCA upgrade is the bank’s significant improvement in its asset quality and provisioning coverage, despite challenges in the operating environment owing to low oil prices, �ѴǴǻ��’s said.
“The upgrade also captures DIB’s improving profitability in recent years, with return on assets (ROA) improving to 2.0 percent for 2016 (stable during the first six months of 2017), up from 1.4 percent for 2013,” �ѴǴǻ��’s said. “The improvement is driven by a substantial reduction in the bank’s provisioning charges, which absorbed 17 percent of pre-provision income in the first half of 2017, down from 36 percent in 2013.”
DIB, Dubai’s largest Shariah-compliant lender, said that its net income rose 13.8 percent in the second quarter to Dh1.1 billion compared with Dh929 million in the same period last year. Net financing income rose 18 percent to Dh1.9 billion for the quarter ending July although income from commissions, fees and foreign exchange income fell 7.7 percent over the same period
“Going forward, the rating agency expects that the bank’s net profitability may face modest pressure, due to increased funding costs, but that it will remain above the domestic average and global median.”