Gulf Investment Corporation (GIC), the investment bank owned by the six Gulf Arab states, has become one of the region’s leading banks and is well-placed to benefit from growth in local capital markets, according to a report by US ratings agency Standard & Poor’s (S&P).

‘GIC should benefit from the commitment of its shareholders and from the high level of business that naturally comes from its position as one of the top banking groups in the Gulf,’ S&P says. ‘As the capital markets in the GCC countries develop, GIC will have increasing opportunities to invest, intermediate and advise.’ The agency has assigned the bank a long- term credit rating of BBB+ and a short-term rating of A-2, with a stable outlook (MEED 17:1:97).

Kuwait-based GIC, which had assets of $10,000 million and equity of just above $1,000 million in 1995, carries out capital markets and investment banking activity while its wholly-owned subsidiary, Gulf International Bank (GIB), is a commercial bank. S&P has already rated GIB at the same grades as its parent institution.

GIC also has capital development and securities portfolios. ‘Although GIC’s capital development business produces a low return, it is a valuable part of the company’s corporate mission,’ S&P says. Return on equity has averaged more than 10 per cent in the last five years. The main constraining factor on the bank’s credit rating is its exposure to the Gulf. This is both direct – GIC has nearly 30 per cent of its risk assets there – and indirect, in that a weakening of oil prices could affect its core businesses and constrain the ability of its shareholder states to provide support if needed.