Islandsbanki hf. : Fitch Ratings affirms Íslandsbanki's credit rating at BBB-/F3
International credit rating agency Fitch Ratings has affirmed an unchanged credit rating for Íslandsbanki. The Bank has an investment-grade rating of BBB-/F3, with a stable outlook.
According to Fitch, the Bank has made a number of gains in its operations in the past year, and its operating environment has improved markedly, but it operates in a small economy still fettered by capital controls. In its rationale, Fitch cites the Bank's strong capital and liquidity ratios and the year-on-year decline in its ratio of impaired loans to total loans.
Debt portfolio restructuring is now complete, and only a negligible share of loans are non-performing after restructuring. Íslandsbanki's non-performing loan (NPL) ratio was 2.2% as of end-2015, down from 3.5% a year earlier. This improvement places the Bank among the 25% of European banks with the lowest NPL ratios.
Furthermore, Fitch notes that the Bank's liquidity and leverage ratios compare well with those of its foreign peers and that the Bank is well prepared for capital account liberalisation, which is anticipated in the near future.
Factors that could put downward pressure on the Bank's credit rating include increased risk appetite in connection with lending in Iceland and abroad, less conservative and liquidity management, and severe shocks to the operating environment that could undermine loan portfolio quality.
Among the factors leading to a positive rating action are continued prudent lending policy, sustained improvements in loan portfolio quality, and strong liquidity. It is also important that matters relating to the offshore overhang and capital account liberalisation be resolved successfully and that the Bank's operating environment remain stable thereafter.