Malaysia's RAM Ratings has assigned respective long- and short-term financial institution ratings of AAA (stable outlook) and P1 to Gulf Investment Corporation GSC ("GIC" or "the Corporation").
Concurrently, GIC's proposed up to RM1 billion (Dh1.1bn) bonds ("Proposed Bonds") have also been assigned a AAA rating, with a stable outlook. The assigned ratings are premised on GIC's strong pedigree, healthy fundamentals and sturdy franchise within the region.
GIC is a diversified financial institution that is jointly owned by the six Gulf Corporation Council ("GCC") countries in the Middle East.
Initially set up to support the development of private enterprises and economic growth within the Gulf region, the Corporation enjoys several types of immunity and exceptions in terms of regional regulatory norms, including exemption from asset nationalisation, currency controls and taxes.
In view of GIC's privileged position, support from its owners is highly likely, should it be required.
GIC has been posting consistent profits since inception; it had even managed a modest profit during the Iraqi invasion of Kuwait (its home base).
Nevertheless, RAM Ratings notes that the marked improvement in GIC's profitability in recent years has been mainly driven by revenue from investments in private equities, investment securities and proprietary trading, all of which give rise to some element of earnings volatility.
Despite this, the corporation maintains a well-diversified investment portfolio, having distributed its investments across various economic sectors and geographic regions.
Furthermore, GIC operates within a comprehensive risk-management structure, with a conservative risk culture.
Meanwhile, the corporation has a wholesale funding profile that is dominated by large deposits from GCC central banks and government agencies, repurchase agreements and long-term borrowings.
While having short tenures, GCC government deposits have historically been stable. Elsewhere, GIC's liquidity profile has remained sound while its capitalisation is deemed adequate, with a Tier-1 capital ratio of 20.6 per cent and a risk-weighted capital-adequacy ratio of 21.7 per cent as of end December 2006. (Reuters)
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