Fitch Ratings has affirmed Kuwait-based Gulf Bank's long-term issuer default rating (IDR) at 'A+' with a stable outlook. The viability rating too has been upgraded to 'bb-' from 'b+'.

In its comments, the ratings agency said the upgrade of the viability rating reflects the Kuwaiti bank's substantial and sustained improvement in asset quality and capitalisation since 2009 besides the bank's sound liquidity and its relatively cautious growth plans, focusing on its core market.

Gulf Bank's long- and short-term IDRs, support rating and support rating floor reflect Fitch's view of the extremely high probability of support from the Kuwaiti authorities, if needed.

This takes into account the Kuwaiti government's ability to support the bank (Kuwait 'AA'/Stable), and the Kuwaiti authorities' long history of strong support for local banks. The ratings also reflect Gulf Bank's systemic importance as the third largest bank in the sector, said the Fitch in its statement.

The viability rating reflects Gulf Bank's improving asset quality and capitalisation, but also takes into account legacy loan problems which are still a constraining factor.

These loan quality issues will require time to work through, although Fitch's expectation is that improvements in asset quality will continue.

Loan quality ratios continued to improve in 2012 and in the first quarter of 2013, with the impaired loan ratio reaching 10.4 per cent at end of the first quarter of 2013 from its peak of 30 per cent in 2009.

Gulf Bank is the second largest conventional bank and the third-largest overall by assets in the Kuwaiti market, accounting for around 10 per cent of the system total at end of  first quarter of 2013.

It is listed on the Kuwaiti stock exchange; the state-owned Kuwait Investment Authority (KIA) is the bank's second-largest shareholder with a 16.1 per cent stake.-TradeArabia News Service