The Bank has ample liquidity and substantial capital to support the proposed growth in lending this year
Capital Intelligence Ratings (CI Ratings), has raised Mashreqbank's financial strength rating (FSR) to A from A-.
In a statement, CI Ratings said the upward revision is underpinned by the bank's long track record of maintaining solid financial fundamentals, which CI Ratings believes the bank would be able to sustain over the long term.
The improved provision coverage ratio in Q1 2018, solid CET 1 ratio and a high capital base, along with very comfortable liquidity and good profitability underpin the ratings. The adoption of IFRS 9 strengthened the loan loss reserve coverage ratio in Q1 2018 without adversely impacting capital adequacy ratios.
The Bank’s underwriting standards and a focus on secured retail lending in the coming quarters are expected to continue to push down risk charges. Mashreq has weathered the recent economic downturn through strategies developed in earlier years that focused on the substantial diversification of the bank's business base, so that the stresses in one part of its portfolio were offset by the relative stability of its other businesses.
Mashreq’s early emphasis on CASA balances from stable avenues such as escrow accounts, cash management and other products have led to a comparatively low dependence on wholesale, time deposits and contributed substantially to its low funding cost and wide margins.
The Bank's large and diversified non-interest income base is a major competitive strength, CI Ratings said.
The Bank’s liquidity ratios remain among the most solid in the sector underscoring management's strong focus on ensuring good liquidity at all times.
Mashreq’s total assets of AED125 billion ($34 billion) at end 2017 ranks it among the larger commercial banks in the country.