Standard & Poor’s Ratings Services has affirmed its ‘BBB/A-3’ long- and short-term counterparty credit ratings on Arab Bank PLC (Bahrain), the Bahrain onshore branches of Jordan’s Arab Bank PLC. The ratings were removed from CreditWatch, where they had been placed with negative implications on March 21, 2011. The outlook is negative.
“The rating action follows the affirmation and removal from CreditWatch negative of our ratings on the Kingdom of Bahrain (BBB/Negative/A-3) on July 20, 2011. The outlook on the bank mirrors that on the sovereign ratings, as we would lower the bank’s ratings if our Transfer & Convertibility (T&C) assessment on the sovereign were to be lowered with the ratings on Bahrain,” S&P in a statement said.
With total assets of $46.2 billion on June 30, 2011, the Arab Bank Group is one of the Middle East’s largest banking organizations. It comprises the main entity, Jordan-based Arab Bank PLC (BB+/Negative/B), its subsidiaries and affiliates, and sister company Arab Bank Switzerland. Several of its operating entities have higher ratings of ‘A-/A-2’–namely, Europe Arab Bank PLC, Arab Bank Australia Ltd., and Arab Bank PLC branches in Dubai, Qatar, and Singapore. Our ‘BBB’ rating on its onshore branch in Bahrain is below this ‘A-‘ level because we cap the rating at the level of our T&C assessment on Bahrain.
Operating in 30 countries across five continents, Arab Bank Group is one of the most geographically diversified banking groups. Around 32% of its loans are to Levant countries, including Jordan, and about 41% to Gulf Cooperation Council (GCC) countries. In Bahrain, Arab Bank PLC operates through five retail branches (excluding an offshore banking unit) and has about $250 million exposure to Bahrain through retail and corporate loans.
The negative outlook on the ratings mirrors that on Bahrain. If we were to downgrade our ratings on Bahrain together with our T&C assessment, we would lower our ratings on the bank as the ratings remain capped by our T&C assessment, as per our methodology. In contrast, a negative rating action on Bahrain without a change in the T&C assessment would not result in a similar action on our ratings on Arab Bank PLC’s (Bahrain). If we revised our outlook on the sovereign rating to stable, we would likely make the same revision to our outlook on Arab Bank PLC (Bahrain).