Moody's downgrades Arab Banking Corporation to Baa3/P-3 (Bahrain)

Stocks and Financial Services Press Releases Friday February 25, 2011 09:42
Limassol--25 Feb--Asian Banker

Limassol, February 24th 2011 -- Moody's Investors Service has today downgraded the foreign currency deposit ratings of Arab Banking Corporation B.S.C. (ABC) to Baa3/Prime-3 from A3/Prime-2. At the same time Moody's has lowered the bank's baseline credit assessment (BCA) to Ba1, from Baa3, which situates the bank at the lower end of the D+ bank financial strength rating (BFSR). The Baa3/Prime-3 deposit ratings and D+ BFSR remain on review for possible downgrade.


Moody's said that the downgrade of the supported deposit rating was driven by the ongoing severe political crisis in Libya, which is majority owner of ABC, through the Central Bank of Libya's (CBL) 59% stake. According to Moody's the highly volatile political situation raises material uncertainty regarding the availability of parental support from the Libyan authorities, notwithstanding their previous track record of providing support. As a result ABC's Baa3 deposit rating now incorporates only one notch of support uplift coming from the bank's minority shareholder the Kuwait Investment Authority (KIA).

Moody's added that the decision to lower ABC's BCA to Ba1 from Baa3 reflects the pressures that the bank is likely to face, given its association with its majority shareholder. ABC maintains some credit exposure to Libya, primarily off-balance sheet, and also exhibits considerable funding reliance on Libyan institutions. Although there is currently no indication that these sources of funds are at risk of withdrawal and although the bank maintains significant reserves of liquid assets to cope with other potential liquidity demands, the anticipated challenges are better reflected in a Ba1 BCA. Conversely Moody's notes the bank's relatively high Tier I capitalization ratio of 19.2% and recent return to profitability.

In keeping standalone and supported ratings on review for possible downgrade, Moody's acknowledges the uncertainty surrounding potential developments in Libya. During the review period Moody's will monitor such developments and also assess to what extent ABC might be affected by them or otherwise prove to be resilient. Solid indications that ABC's is able to conduct business as usual or that it has successfully coped with additional stress could lead to the confirmation of current ratings. By contrast, signs material deterioration in the bank's liquidity position could lead to a further downward rating action. Moody's review will also consider the extent of support from the bank's minority shareholder KIA. (February 25, 2011)--

Latest Press Release

mai welcomes real estate developer CMC on November 19

Market for Alternative Investment (mai) will list Chaoprayamahanakorn pcl, a leading real estate developer onNovember 19, under the ticker symbol "CMC". The company has a market capitalization at its initial public offering (IPO) of THB 3.00 billion...

KTC - Chilito Mexican Grill - Farm Factory provide members special privileges for payments made using QR Pay in the KTC Mobile app.

Mrs. Pranaya Nithananon, Vice President - Credit Card Business, "KTC" or Krungthai Card Public Company Limited, provides KTC VISA and KTC MasterCard credit card members who make payments through KTC QR Pay in the "KTC Mobile" app worth Bt. 300 or more...

Photo Release: KBank opens new flagship branch and THE WISDOM Lounge at ICONSIAM

Mr. Wirawat Panthawangkul (3rd from left), KBank Senior Executive Vice President, and Ms. Chadatip Chutrakul (4th from left), Director of ICONSIAM Co., Ltd., and Chief Executive Officer of Siam Piwat Co., Ltd., participated in the opening ceremony of...

Photo Release: CIMB Group Joins RippleNet to Power Instant Payments Across ASEAN

Tengku Dato' Sri Zafrul Aziz, Group CEO of CIMB Group (right), and Brad Garlinghouse, Ripple CEO (left) commemorating the strategic collaboration between CIMB Group and Ripple to power instant payments across ASEAN at the Singapore FinTech festival 2018...

CIMB Group Joins RippleNet to Power Instant Payments Across ASEAN

CIMB is one of the first banks to leverage blockchain technology to tap into region's USD120 billion remittance business CIMB Group ("CIMB" or "the Group") and Ripple have entered into a strategic collaboration to enable instant cross border payments...

Related Topics