International Development Bank – Ratings Affirmed

(MENAFN- Capital Intelligence Ltd) Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed the Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) of International Development Bank for Investment and Finance (IDB or the Bank) at ‘B-’ and ‘B’, respectively. The LT FCR Outlook is Stable. At the same time, CI Ratings has affirmed IDB’s Bank Standalone Rating (BSR) of ‘b-’ with a Stable Outlook, Core Financial Strength (CFS) rating of ‘bb-’ and Extraordinary Support Level (ESL) of Uncertain.

CI has also affirmed IDB’s Long- and Short-Term Ratings on the Iraq National Scale at ‘iqBBB+’ and ‘iqA2’, respectively, with a Stable Outlook. These are supported and constrained by the same factors as the CFS as outlined below.

The Bank’s BSR is derived from a CFS rating of ‘bb-’ and the constraints imposed by the Operating Environment Risk Anchor (OPERA) of ‘c+’. The latter is at a level indicative of a high degree of risk and is a key rating constraint for IDB, as well as for all other Iraqi banks. The CFS is supported by the Bank’s good liquidity underpinned by an expanding customer deposit base, and by sound capital ratios with a significant CET 1 element after the capital increase in Q4 24. Additional supporting factors are the improved operating and net profitability alongside good loss absorption capacity, and the expanding business franchise, including a well-executed business strategy. The factors constraining the CFS are IDB’s high credit risk profile given Iraq’s difficult operating environment and elevated geopolitical risk (in common with peer banks), as well as the concentrations seen in assets and liabilities. The deterioration seen in loan asset quality in 2023 and the weak regulatory and supervisory framework (although improving) are also credit challenges.

CI considers the likelihood of sufficient and timely official support being made available to IDB (and all other Iraqi banks) in the event of financial distress to be uncertain and, consequently, does not incorporate such support into the Bank’s LT FCR. Even if the government may be willing to provide extraordinary support in case of need, its financial capacity to do so is considered limited as reflected by our internal assessment of Iraqi sovereign credit risk.

IDB has achieved good progress expanding its business franchise and balance sheet over the last five years (albeit from a low base) – total assets recently crossed the USD2bn mark. Although still comparatively small in terms of balance sheet size, IDB is significantly larger than almost all other Iraqi private sector banks. The latter continue to face formidable challenges building their business franchise and navigating Iraq’s difficult operating environment. IDB’s relative success is down to its capable management and board, as well as effective execution of its business strategy. This factor supports the rating. CI considers the Bank’s business model focused mainly on corporate banking to be fairly resilient, despite the ongoing concentration risks. IDB has thus far withstood external shocks alongside significant operating environment challenges. We expect the growing emphasis on retail banking to bring diversification benefits to assets, funding and earnings in the medium term.

IDB’s consistently good liquidity is a credit strength. CI expects the Bank will maintain high liquidity going forward, underpinned by sustained customer deposit expansion. The dearth of avenues in which to profitably channel excess liquidity in the Iraqi banking system means that the bulk of IDB’s liquidity remains deployed in Central Bank of Iraq (CBI) balances and cash. Within the context of Iraq’s high sovereign credit risk, CBI balances produce concentration risk issues which may render IDB’s balance sheet and earnings vulnerable to a sovereign event. This risk factor is a credit challenge. The importance given to safeguarding liquidity is crucial in a banking system where the central bank is understood to be a lender of last resort only in exceptional circumstances.

Aided by a comparatively extensive and growing branch network (including outlets in the UAE), customer deposits grew further in money terms in H1 24, driven mostly by CASA. The latter continue to dominate customer deposits, and are complemented by three- and five-year time deposits to fund retail loans (against salary assignment) as well as to minimise maturity mismatches. While time deposits have improved funding stability to some degree, customer deposits in Iraq remain vulnerable to confidence shocks. Partially mitigating the potential systemic liquidity and funding risk in this regard is the Bank’s large stock of liquid assets. There is some concentration in customer deposits, but not to the same extent as at other Iraqi banks.

Notwithstanding the downward trend seen over the last few years, IDB has continually maintained sound capitalisation and leverage. The IQD100bn rights issue in Q4 24 enabled IDB to fulfil the CBI-revised IQD400bn paid-up capital requirement. This, in turn, strengthened the Bank’s already satisfactory total capital adequacy and leverage ratios. The capital base remains of high quality, and the good buffer provides effective mitigation against Iraq’s high-risk operating environment. This is a credit strength. While we anticipate capital ratios to resume their downward trend in the intermediate term due to asset expansion, they are expected to remain very sound and to provide ample scope for business expansion. IDB’s capacity to generate capital internally strengthened noticeably in recent periods due to improved profitability, alongside a policy of full earnings retention.

Loan asset quality weakened to some degree in 2024, in large part due to government delays in invoice payments to GREs. The recent decline in oil prices could renew government fiscal pressures and reduce liquidity in the broader economy. Nonetheless, we consider IDB’s asset quality metrics to be adequate in relation to the current rating level. Management expects a significant amount of these past due accounts to be settled in the short term. CI also anticipates the NPL accretion rate to decelerate noticeably in the current year on the grounds of a sharp decline in stage 2 loans at end-2024. Although the high borrower concentrations elevate the risk profile of the credit portfolio, this is partially mitigated by the moderate share (35%) of loans in total assets. Restructured NPLs were minimal. Loan-loss reserve cover for NPLs remained good, reflecting IDB’s strong capacity to set aside provisions through the P&L. The Bank’s credit loss absorption capacity is also supported by a sound capital base comprising CET 1 funds, as indicated by a good extended NPL coverage.

Notwithstanding some degree of earnings volatility over the last five years, IDB’s generally satisfactory profit performance reflects its longer track record in comparison with most other Iraqi private sector banks. The quality of earnings is deemed to be acceptable, although concentrated in fee and commission income. That said, IDB’s capacity to generate operating income improved further in H1 24, lifted again by higher commissions and net interest income, the latter assisted by a sound net interest margin. Operating income generation is currently better than that of most other Iraqi banks, reflecting IDB’s rather sizeable lending and trade finance operation. We anticipate that the focus on retail banking will help reduce earnings volatility and diversify revenue streams over time. IDB delivered a good performance in H1 24, after a rebound in operating and net profitability in 2023. Operating profitability provides good risk absorption capacity. Meanwhile, cost efficiency improved further to a good level.

Iraq’s OPERA takes into account economic volatility and underlying structural and fiscal weaknesses, as well as significant socio-economic imbalances and deficiencies in the country’s political and institutional frameworks. Although the Iraqi economy started to recover in 2024, buoyed by favourable oil prices, credit risk remains elevated. The OPERA also reflects the challenges inherent in a banking sector that is small, underdeveloped and dominated by financially weak state-owned banks. The latter elevate banking systemic risks. Both the legal system and corporate governance standards are also weak.

Rating Outlook

The Outlook for IDB’s ratings is Stable, indicating that they are unlikely to change over the next 12 months. This reflects our view that the Bank will maintain its current risk profile.

Rating Dynamics: Upside Scenario

We do not expect an upward change in the ratings and/or outlook, unless the OPERA and our internal assessment of Iraq’s sovereign credit risk improves. These are currently seen as being unlikely to change within a 12-month timeframe.

Rating Dynamics: Downside Scenario

Although not our current expectation, the Bank’s ratings could be reduced by one notch over the next 12 months in the event that key metrics deteriorate considerably. The ratings could also be lowered, should the OPERA and/or our internal assessment of sovereign credit risk deteriorate.

Contact

Primary Analyst: Morris Helal, Senior Credit Analyst; E-mail: ...
Secondary Analyst: Rory Keelan, Senior Credit Analyst
Committee Chairperson: Rory Keelan

About the Ratings

The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.

The following information sources were used to prepare the credit ratings: public information and information provided by the rated entity. Financial data and metrics have been derived by CI from the rated entity’s financial statements for FY2020-23 and H1 24. CI may also have relied upon non-public financial information provided by the rated entity and may also have used financial information from credible, independent third-party data providers. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process.

The principal methodologies used to determine the ratings are the Bank Rating Methodology, dated 3 April 2019 (see , and the National Scale Ratings Criteria for Iraq, dated 15 March 2020 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at

This rating action follows a scheduled periodic (annual) review of the rated entity. National and International ratings on the entity were first released in May 2020 and last updated in May 2024. The ratings and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure. The ratings have been assigned or maintained at the request of the rated entity or a related third party.

Conditions of Use and General Limitations

The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.

Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.

Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.

The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.

Copyright © Capital Intelligence Ratings Ltd 2025

MENAFN22052025002960000411ID1109581342