Fitch Ratings has placed BMB Investment Bank’s long-term issuer default rating (IDR), short-term IDR and viability rating (VR) on rating watch negative (RWN).
BMB’s ratings have been placed on RWN following the $6m loss reported in the Q113 financial statements, as a result of what the Chief Executive Officer (CEO) has said to be “unauthorised transactions – potentially involving fraudulent activities.”
A statement by BMB’s CEO revealed that some members of the previous management team of the bank have been dismissed and the matter referred to its lawyers. The RWN reflects the increased legal and reputational risks to BMB, as well as the possibility of further losses stemming from these activities. Fitch will resolve the RWN once it has assessed the likely impact of these events.
BMB’s VR reflects its small wholesale banking franchise, concentrated wholesale funding profile and small equity base. The agency also considers the bank’s achievements in reducing its exposure to private-equity commitments in recent years, and diversifying earnings into more stable, recurring revenue streams.
The support rating is based on Fitch’s view that BMB would be unlikely to receive solvency support from the Bahraini authorities, if needed, given its wholesale bank status.
The RWN indicates that the most likely directional change is a downgrade. Over the coming weeks, Fitch will aim to assess the potential for further losses materialising as well as to establish if recent events have had a negative reputational effect on the bank’s franchise and funding profile.
Established in 1982, BMB is a small, niche wholesale bank operating from a single branch in Bahrain. It offers its Middle-East-based high-net-worth and institutional clients a range of trade finance, asset management and investment banking services. BMB’s shares are listed on the Bahrain Stock Exchange. Al Fawares Holding, a Kuwaiti conglomerate, is BMB’s main shareholder with a 64.5% holding.