Fitch assigns Global with BBB, Outlook stable

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Fitch Ratings has Thursday affirmed Global Investment Houses (Global) ratings at Long?term foreign currency Issuer Default Rating (IDR) BBB with Stable Outlook, Short?term foreign currency IDR F3, Individual C and Support 5. It has also affirmed the Support Rating Floor at No Floor.

Fitch has also assigned Global a Long term local currency IDR of BBB with Stable Outlook and its 50 million Kuwaiti dinars fixed/floating?rate notes due 2013 an expected Long?term local currency rating of BBB. The final rating on the notes is contingent on the receipt of final documentations conforming materially to information already received. The Long and Short?term IDRs and Individual rating reflect Globals growing franchise in regional corporate finance and asset management (albeit currently concentrated in Kuwait), good profitability, a sound capital base and good cost efficiency. They also reflect substantial exposure to market risk on equity investments and the resulting potential for volatile earnings, reliance on short?term borrowing and sensitivity to the regional economy and stock markets. Although regulated by the Central Bank of Kuwait, Global is not a fully licensed bank, but an investment company. As such, in Fitchs opinion support from the authorities if Global were in difficulties, is considered possible, but cannot be relied upon. Support from its core shareholders might also be possible, but the extent of such support cannot be verified.

Upside potential for Globals ratings is currently limited given its risk profile. Downside potential could arise from the failure to lengthen the companys funding or to adequately manage the risks associated with Globals rapid expansion plans. Any deterioration in the economic environment or regional stock markets to such an extent that they have an adverse impact on the companys performance would also be negative for the ratings. In 2008 Globals equity more than doubled to KD690.8 million, following a share issue (1.1 billion U.S. dollars) plus retained earnings, and at end?H108 the company had a Tier 1 ratio of 34 percent. Global will use the funds to continue to grow in the GCC and Middle East and North Africa (MENA) regions, acquiring investment banking, asset management and brokerage licenses, co?investing in the companys managed funds and potentially acquiring a GCC?focused asset management company or commercial bank. In 2007 Global was granted a license by the Capital Market Authority of Saudi Arabia to establish a full?service investment banking and asset management business. The company aims to expand its employee base in Saudi Arabia from 25 staff to 100 by the end of 2008. Fitch considers the growth plans to be ambitious given the competitive banking environment in Saudi Arabia.

Globals net income increased 27 percent y?o?y in 2007 to KD92.2 million, driven by gains from exiting private?equity investments and higher trading income. Strong performance continued into H108, with net income rising 75 percent y?o?y, driven by growth in investment banking and advisory fees, realized and unrealized gains on investments and gains from the disposal of investment properties. At end?H108 Assets under Management stood at $9.4 billion.