Fitch Ratings has downgraded Bahrain-based BBK’s long-term issuer default rating (IDR) to ‘BBB-‘ from ‘BBB+’, National Bank of Bahrain’s (NBB) long-term IDR to ‘BBB’ from ‘A-‘, Ahli United Bank BSC’s (AUB) long-term IDR to ‘BBB+’ from ‘A-‘ and its wholly owned subsidiary Ahli United Bank (UK) PLC’s (AUBUK) long-term IDR to ‘BBB+ from ‘A-‘.
All four banks’ long-term IDRs have been placed on Rating Watch Negative (RWN).
The rating actions follow the agency’s downgrade of Bahrain’s sovereign ratings. The four banks’ IDRs are either based on or constrained by Bahrain’s sovereigns IDRs.
Fitch has also placed BBK’s, NBB’s and AUB’s Individual Ratings on RWN due to the impact that the continuing political and economic uncertainty in Bahrain could have on the banks’ profitability, asset quality, funding and liquidity.
BBK’s IDRs reflect Fitch’s view that there would be a high probability of BBK receiving support from the Bahraini authorities if needed, given its importance to the Bahraini banking system and its 32% ownership by the Bahraini government.
NBB’s IDRs are aligned with the Bahraini sovereign and reflect the high probability that it would be supported by the Bahraini authorities in case of need, based on its leading position in the domestic market and the government of Bahrain’s 49% direct ownership of the bank.
AUB’s IDRs are driven by the high probability of support in case of need from the government of Kuwait (‘AA’/Stable), which, through the Public Institute for Social Security, holds an 18.8% stake in the bank. AUB has sizeable operations in Kuwait, through its subsidiary, Ahli United Bank (Kuwait) (AUBK), in which the Public Institute for Social Security holds a direct 12.2% stake.
AUB’s Bahrain business represents less that 20% of group assets and net income. AUB’s Support Rating Floor of ‘A-‘ has been withdrawn in line with Fitch’s treatment of institutional support. AUB’s LT IDR is constrained by Bahrain’s Country Ceiling and the downgrade reflects this.
AUBUK’s IDRs are equalised with those of its parent, AUB, based on the high level of integration and 100% ownership by AUB. The downgrade of AUBUK therefore mirrors the rating action taken on the parent.
AUBK, Ahli Bank QSC’s (ABQ) and Ahli Bank SAOG’s (ABO) IDRs are unaffected by the sovereign rating action as they are driven by support from the Kuwaiti, Qatari and Omani sovereigns, respectively, based on their systemic importance in these markets. Arab Banking Corporation’s (ABC) and BMB Investment Bank’s (BMB) ratings are also unaffected by the sovereign rating action. Both are wholesale banks with limited local operations despite being headquartered in Bahrain.
The agency said that would continue to monitor developments and expects to resolve the RWN on BBK, NBB, AUB and AUBUK’s IDRs once the RWN on Bahrain’s IDR is resolved. The RWN on BBK, NBB and AUB’s Individual ratings will be reviewed within six months and resolved once the situation in Bahrain stabilises.