Sharjah Islamic Bank

In our view, the stable outlook reflects that the bank's creditworthiness will benefit from strong capitalization and exposure to the Sharjah government and its related entities over the next 18-24 months. We could consider a negative rating action if we observed a deterioration of asset quality or weaker-than-expected capitalization. The risk-adjusted capital (RAC) ratio dropping below 10%, which could come from faster-than-expected growth, would signal this. We could also take a negative rating action if we see a material deterioration in the creditworthiness of the Sharjah government, the bank's largest counterparty, or if we consider SIB's systemic importance to have lowered. A positive rating action is remote in the next 18-24 months, since it would require SIB to materially strengthen

...We expect Sharjah Islamic Bank to retain strong capital levels, despite growth. We expect Sharjah Islamic Bank (SIB) to fully refinance its Tier 1 sukuk, which is callable in mid-2025, and to distribute about 40% of its profits as dividends. We do not anticipate a major increase in domestic lending activities given our modest assumptions about credit growth in the UAE. However, we expect the bank's foreign exposures to increase as it targets Saudi Arabia and other markets through its investment business. SIB's asset quality will remain commensurate with the sector average. As of year-end 2023, Stage 3 financings accounted for 5.5% of total financings, an improvement from 2022 due to write-offs and settlements of its problem loans. However, we think that this ratio will improve to below 5% over 2024 on the back of restructurings exiting cool-off periods....

Full Report