London: Fitch Ratings has affirmed National Bank of Bahrain’s (NBB) and BBK B.S.C.’s (BBK) long-term issuer default ratings (IDRs) at BBB.
Fitch has also affirmed Arab Banking Corporation’s (ABC) IDR at BBB-; Ahli United Bank B.S.C.’s (AUB) IDR at BBB+ and Gulf International Bank’s (GIB) at A. The outlooks on all the banks’ long-term IDRs are stable.
At the same time Fitch has upgraded BBK’s Viability Rating (VR) to bbb- from bb+. All other Bahraini banks’ VRs have been affirmed.
The rating actions follow Fitch’s periodic review of Bahraini banks.
BBK’s, AUB’s and GIB’s IDRs are support-driven.
BBK’s IDR, Support Rating and SRF are driven by support from the Bahraini sovereign (BBB/Stable). Fitch’s view of support for BBK is based on its systemic importance as a major retail and corporate bank in Bahrain, and the Bahraini authorities’ high propensity to support domestic commercial banks. BBK is 32% owned by the Bahraini government, which also supports Fitch’s view on sovereign support.
Although the Central Bank of Bahrain (CBB) regulates all licenced banks in Bahrain, Fitch does not factor any Bahraini sovereign support in the ratings of the wholesale banks, GIB and ABC.
AUB’s IDR and Support Rating reflect the high probability of institutional support from its core shareholder, the Public Institute for Social Security (PIfSS), an arm of the State of Kuwait (AA/Stable), which holds a 17.8% stake. The very strong links between PIfSS and AUB date back to before the creation of AUB, and include PIfSS’s strong interest as shareholder in both AUB and its Kuwaiti subsidiary (12.2% stake). However, support from PIfSS is constrained by Bahrain’s Country Ceiling (BBB+) and the Stable Outlook reflects that on the Bahraini sovereign ratings.
GIB’s IDR and Support Rating are driven by Fitch’s expectation of an extremely high probability of support from the bank’s longstanding majority shareholder, the Public Investment Fund of Saudi Arabia (AA/Stable; 97.2% stake), despite the bank being licenced and headquartered in Bahrain. Our view of support is driven to a large degree by the bank’s ownership and a strong track record of support, which has been clearly demonstrated in the past, and is the main reason GIB’s IDR and SRF are above those of all but the largest Saudi banks. The ratings are not constrained by the Bahrain Country Ceiling, reflecting that the majority of GIB’s assets and liabilities are outside of Bahrain, and would not be subject to Bahraini convertibility risks in Fitch’s view.
NBB’s and ABC’s Long-term IDRs are driven by their respective VRs. In the case of NBB, the Support Rating and SRF reflect Fitch’s expectation of an extremely high probability of sovereign support from the Bahraini authorities, if required. This view is based on NBB’s leading domestic franchise and its significant Bahraini government ownership (45%). ABC’s Support Rating is driven by potential institutional support from its founding shareholders, the Central Bank of Libya (CBL) and the Kuwait Investment Authority (KIA). While support from the CBL is difficult to assess, Fitch expects some support from the KIA.