Capital Intelligence predicts a stable outlook for EDBI

Capital Intelligence (CI), the international credit rating agency, announced today that it has affirmed Export Development Bank of Irans (EDBIs) Long-term and Short-term Foreign Currency (FC) Ratings at BB- and B, respectively, on Stable Outlook.

The Support Rating is affirmed at '3', predicated on the expectation of a high likelihood of liquidity as well as capital support by the Iranian government, which owns 100 percent of EDBI.

The Financial Strength Rating (FSR) is affirmed at 'BB+', on 'Stable' Outlook. This reflects the Bank's very strong capital adequacy, improved liquidity and growth in net profit, despite the challenges posed by international economic sanctions.

The Bank has enjoyed good volume growth as Iran's non-oil exports have grown to new trading partner countries. However, further closure of international markets to Iranian exports or greater impediments to trade finance for Iranian banks would also pressure the ratings as they may seriously disrupt EDBI's operations and further impact its asset quality, funding capacity and profitability.

Although asset quality improved at FYE11 through tighter credit standards and ongoing collection efforts, both the NP-IFF ratio and loss reserve coverage have weakened again in H1 FY12 due to the ongoing challenging operating environment.

The government has given the Bank a strong endowment of capital. The plan is for further capital increases through capitalisation of existing funding from official sources - and it is expected that this should enable EDBI to continue its expansion while maintaining a sound capital base.

It is expected that the Bank will continue to receive inexpensive foreign currency funds from official sources. This underpins its low funding cost and continues to drive EDBI's gross income generation through a strong profit differential. Liquidity has also improved as the Bank has diversified its sources of funding by substantially growing its customer deposit base.

With total assets of USD 6.2 billion, EDBI may best be considered as a policy bank. The Bank was established by Act of Parliament in 1991 in order to promote Iran's non-oil exports by providing financial services to exporters of Iranian goods and services, such as L/C facilities and export finance. EDBI's international network includes a representative office in Almaty, Kazakhstan, a minority share in a joint venture bank in Belarus and fully owned Development International Bank (Venezuela). Headquartered in Tehran, the Bank operates 40 branches throughout Iran. EDBI also engages in retail banking activities by providing a full range of customer deposit products.