The affirmation of the IsDB's Aaa rating and stable outlook reflect Moody's view that the IsDB's risk profile will remain very strong over the medium-term, supported by low leverage, a very large buffer of liquid assets relative to net cash outflows, and a stock of callable capital from shareholders at almost three times the outstanding debt stock. Despite the relatively low credit quality of the loan book, non-performing assets (NPAs) remain very low, supported by the high level of sovereign-backed exposures. Leverage has risen, but remains favourable compared to Aaa-rated peers. The IsDB's liquidity position is strong, and market access is favourable given the IsDB's prominence as one of the few top-rated Sharia'h compliant issuers in the Islamic finance world.
The coronavirus pandemic, which has led to a sharp deterioration in the global economic outlook and, relatedly, to a very large fall in the price of oil, has created an unprecedented shock to a wide range of regions and markets. Moody's regards the coronavirus outbreak as a social risk under its ESG framework. For the Islamic Development Bank, Moody's expects the shock will transmit mainly through downward pressure on the quality of the loan book. The impact of coronavirus on oil demand and oil prices has also increased pressure on several of the IsDB's major shareholders. We expect shareholders' capacity to support to remain resilient, although under a more severe scenario, strains could appear.
The backed senior unsecured MTN programme ratings of IDB Trust Services Limited and ISDB Trust Services No.2 Limited have been affirmed at (P)Aaa, and IDB Trust Services Limited's backed senior unsecured rating has also been affirmed at Aaa. The rating of the certificates of IDB Trust Services Limited is in line with the Aaa long-term foreign currency rating of the IsDB's Ordinary Capital Resources. Moody's regards the certificates as senior unsecured obligations, without any preference or priority, among all trust certificates of the same series and with all other present and future trust certificates.