RIYADH: Fitch Ratings has placed Mashreqbank’s bbb- viability rating (VR) on rating watch negative, following a sharp and unexpected drop in the bank’s capitalization, while other ratings are unaffected, the agency said in a statement.
Mashreq’s common equity Tier 1 (CET1) capital ratio and total capital adequacy ratio (CAR) fell to 12.8 percent and 14 percent, respectively, at the end of the first half of this 2021, from 14.9 percent and 16 percent at end of 2020.
The decline in capitalization was mainly due to an increase in risk-weighted assets by 12 percent year-on-year as Mashreqbank grew its balance sheet by 9 percent in the first half. That led to an 81 basis point reduction in the capital adequacy ratio while changes related to the Basel III framework shaved off another 70 basis points.
“We have placed Mashreq’s ‘bbb-’ capitalization and leverage factor score on negative outlook, signaling that a further decline or inability to sustainably restore the CET1 capital ratio to levels commensurate with historical averages and the bank’s risk profile will likely result in a downgrade of the VR,” the rating agency said.
Mashreqbank has applied for a banking license in Saudi Arabia and is seeking to enter the Omani market, CEO Ahmed Abdelaal told Bloomberg News last month. The bank sees the future of retail banking as digital only, Abdelaal said.
