Sharjah Islamic Bank

The stable outlook reflects our view that the bank's creditworthiness will continue to benefit from strong capitalization and exposure to the Sharjah government and its government-related entities (GREs), which together with the expected improvement in the economic environment, underpin our expectation of only a slight deterioration in asset-quality indicators. A positive rating action is remote in the next 12-24 months, since it would require SIB to materially strengthen both its franchise and capitalization, with the RAC ratio sustainably exceeding 15%. We could consider a negative rating action if we observed sharper deterioration of asset quality or weaker capitalization than expected, signaled by the RAC ratio dropping below 10%, which could come from faster-than-expected growth. We could also take a negative

...The rating balances Sharjah Islamic Bank's (SIB's) status as the flagship bank of the Emirate of Sharjah against its limited but growing franchise outside Sharjah. SIB's total assets represented about 1.8% of systemwide total assets in the UAE at year-end 2021. However, it ranked fourth among local Islamic banks, with a market share of around 7%-8% in the UAE Islamic market at year-end 2021. The bank is the flagship financial institution in the emirate of Sharjah. We view the bank's capitalization as a positive factor. This is underpinned by our forecast that our risk-adjusted capital (RAC) ratio before concentration adjustments will remain at 12.5%-13.2% over the next 12-24 months. We expect SIB will expand its financings by 5%-8% over the same period and its intermediation margin will slightly improve, thanks to higher rates, which will help the bank's overall profitability in our view. While cost of risk will normalize under our base case scenario, we still expect a marginal deterioration...

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