May 10 2011 |
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Gulf International Bank Affirmed At 'BBB+/A-2' And Off Watch On Reassessment Of Its Bahrain-Related Risks;Outlook Stable
We believe the past two months have tested Bahrain-based Gulf International Bank 's ( GIB ) business profile and its resilience to Bahrain's sovereign and country risk, as well as its operating environment.A term loan the bank raised from its core shareholder, based in Saudi Arabia, in March 2011 also supports our view that GIB is likely to receive strong extraordinary support from its shareholder.
GIB 's wholesale banking activity, its limited exposure to Bahrain, and its track record, in our view, support a rating higher than our 'BBB' transfer and convertibility assessment on Bahrain.
Therefore, we are affirming our 'BBB+/A-2' ratings on GIB and removing them from CreditWatch negative.
The stable outlook reflects our view that
GIB
will remain insulated from Bahrain-related risks and that its business and financial profiles--as well as its role and links to its shareholder--will remain virtually unchanged.
The rating action reflects our view that GIB is well insulated from sovereign and country risks related to the Kingdom of Bahrain (BBB/Watch Neg/A-3). Consequently, we rate GIB higher than our 'BBB' transfer and convertibility (T&C) assessment for Bahrain (which reflects our view of the likelihood of the sovereign restricting nonsovereign access to foreign exchange needed to satisfy the nonsovereign's debt obligations).
In addition, the affirmation takes into account the bank's funding and liquidity position, which has demonstrated resilience in Bahrain's recent turbulent operating environment. We also believe GIB could benefit, if necessary, from extraordinary support from its 98% owner, the Public Investment Fund ( PIF ; not rated) in the Kingdom of Saudi Arabia (AA-/Stable/A-1+), given the US$500 million five-year term loan the bank raised from PIF on March 14, 2011. Through the loan, granted just prior to the escalation in political and social unrest in Bahrain, we understand GIB aims to lengthen the term structure of its funding.
A material deterioration in GIB 's core operational performance or asset quality, or a dramatic increase in its exposure to Bahrain-related assets or liabilities, could trigger a negative rating action.
- Ends -
RELATED CRITERIA AND RESEARCH
All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated.
Methodology: Criteria For Determining Transfer and Convertibility Assessments, May 18, 2009
Bank Rating Analysis Methodology Profile, March 18, 2004
Rating Government-Related Entities: Methodology And Assumptions, Dec. 9, 2010
© Press Release 2011
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