Wednesday 20 January 2021

Moody's upgrades ratings of three Bahraini retail banks

LISSAMOL (Cyprus), December 20, 2018

Moody's Investors Service (Moody's) has affirmed the long-term deposit and issuer ratings of four retail banks it rates in Bahrain, as well as the senior unsecured and subordinated debt ratings.

These banks are BBK, National Bank of Bahrain (NBB), Bahrain Islamic Bank (BiSB) and Khaleeji Commercial Bank (KHCB).

Moody's also affirmed the banks' baseline credit assessments (BCA), adjusted BCAs, Counterparty
Risk Assessments (CRAs) and Counterparty Risk Ratings (CRRs) for these four institutions.

However, only BBK, NBB and BISB's long-term ratings were changed to stable from negative by the top ratings agency on December 17. The outlook on KHCB's long term ratings still remains negative.

Moody's decision is mainly driven by the affirmation of the Bahraini government's B2 issuer rating and the change in outlook to stable.

"The banks' BCAs are already at the government level, reflecting their standalone strengths, and their long term ratings do not benefit from government support assumptions, despite our view of the strong willingness of the government to provide support for banks in case of need," the ratings agency said in its review.

NBB's BCA reflects the bank's resilient deposit funding and healthy liquidity, which benefit from its leading retail franchise in Bahrain, and healthy loss-absorption capacity, supported by its strong capital and solid profitability.

These strengths are moderated by high deposit and credit concentrations, and also an increasingly difficult operating environment that increases NBB's already weak asset risks.

BBK's BCA captures its strong domestic franchise, which supports its sound profitability; solid liquidity buffers and resilient funding profile; and adequate capital levels.

These strengths are counterbalanced by the bank's high deposit and credit concentrations, and a difficult operating environment, which increases asset risks.

BIsB's BCA reflects the bank's improved capital base and solid funding profile, despite tightening liquidity. These strengths are moderated by the bank's weak asset quality, the elevated credit risk in the bank's unseasoned and high-growth loan portfolio, and the material borrower- and sector-concentration risks.

The Moody's decision mirrors the change in the outlook for Bahraini government's issuer rating to stable from negative on the back of the $10-billion financial support package extended to Bahrain from its GCC neighbors, which, together with fiscal consolidation measures, will help to reduce the government's financing needs.

The affirmation of KHCB ratings reflects the resilience of the bank's b2 BCA despite the recent decline in some of its key financial metrics, stated Moody's in its review.

KHCB's b2 BCA reflects the bank's adequate capitalisation, and deposit-funded profile, coupled with healthy liquidity. These strengths are moderated by high deposit and credit concentrations; weak asset quality and profitability, further strained by an increasingly difficult operating environment; and increased reliance on market funding.

The bank's BCA and long term ratings are already at sovereign level and do not benefit from any government support despite our belief of the government's willingness (within its capacity) to provide support for banks in case of need.-TradeArabia News Service

Tags: Bahrain | Ratings | Moody's | Retail banks |

More Finance & Capital Market Stories

calendarCalendar of Events