Moody's affirmed the Arab Petroleum Investments Corporation's long-term issuer and senior unsecured ratings at Aa2 while maintaining a stable outlook for the multilateral development bank.
The agency based its assessment on the Dammam-based bank's "high capital adequacy, supported by a track record of strong profitability, robust asset quality and low levels of nonperforming assets, which balance relatively high leverage."
Apicorp, which is owned by the 10 members of the Organisation of Arab Petroleum Exporting Countries, is also "supported by its very strong liquidity, underpinned by ample availability of liquid resources to cover upcoming net cash outflows, and a well-diversified funding structure," the agency added.
Moody's took into account potential risks the bank faces from operating in countries with elevated geopolitical tensions and high exposure to commodity prices.
However, its exposure to these uncertainties is counterbalanced by "strong corporate governance and risk management practices, reflected in resilience to these risks over the past decade, and a trend towards greater diversification of its portfolio".
This year, Apicorp is looking at supporting clients in the energy sector to tide over the difficulties of the Covid-19 pandemic, with disbursements of up to $2 billion.
Last year, it rolled out a $500m countercyclical package to support sustainable projects in the conventional and renewables space.
Moody's noted in its assessment that the bank's strong profitability supported its capital position.
The Dammam-based lender reported a 3 per cent rise in net income for 2020.
Net income rose to $115 million from the year-earlier period. Apicorp's performance was supported by significant capital gains from its treasury and capital markets portfolio. The portfolio gained 488 per cent after netting $46m in capital gains last year.
Return on assets and equity averaged 1.9 per cent and 5.8 per cent respectively, during 2013-20, Moody's noted.
"Moody's expects this strong financial performance to continue to support the corporation's capital buffers in the next few years," the agency said.
"This will allow the corporation to maintain stable leverage, albeit at relatively high levels compared to similarly-rated Multilateral Development Banks (MDBs) while growing its development assets," it added.