We lowered the local currency long-term rating on Jordan to 'BB' from 'BB+' on Nov. 23, 2011.
Consequently, we are lowering our long-term rating on Jordan-based Arab Bank PLC to 'BB' from 'BB+'.
The negative outlook on Arab Bank PLC mirrors that on the sovereign ratings because we consider that the bank is subject to sovereign risk due to its incorporation in Jordan and its holding of large amounts of Jordanian sovereign debt.
PARIS (Standard & Poor's): Standard & Poor's Ratings Services said today that it has lowered its long-term counterparty credit ratings on Jordan-based Arab Bank PLC to 'BB' from 'BB+'. The short-term counterparty credit ratings were affirmed at 'B'. The outlook is negative.
The rating action follows the recent negative rating action on the Hashemite Kingdom of Jordan (BB/Negative/B; for further details see "Long-Term Local-Currency Rating On Kingdom of Jordan Cut To 'BB'; Foreign-Currency Ratings Affirmed; Outlook Negative," published on Nov. 23, 2011). The lowering of the local currency ratings is based on Standard & Poor's new sovereign criteria. Among several factors, local currency ratings can only enjoy uplift from the foreign currency ratings under an independent monetary policy with a track record of a floating exchange rate. The Jordanian dinar (JOD), however, has been pegged to the U.S. Dollar since 1995. As a result, the local currency ratings on Jordan are equalized with the foreign currency ratings at 'BB/B'.
The ratings on Arab Bank PLC reflect the strengths of the Arab Bank Group (not rated) but also its incorporation in Jordan, where the bank is subject to sovereign risk. Hence, the ratings on Arab Bank PLC are constrained by the local currency ratings on the sovereign. With total assets of $45 billion on Sept. 30, 2011, the Arab Bank Group is one of the Middle East's largest banking organizations. Operating in 30 countries across five continents, Arab Bank Group is also one of the most geographically diversified banking groups. It deploys about 32% of its loans in Levant countries, including Jordan, and about 41% in the Gulf Cooperation Council countries.
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-Ends-
About Standard & Poor's in the GCC
Standard & Poor's is the leading provider of financial market intelligence to customers in the Gulf's credit risk management, wealth management, and data and information markets. Since entering the region in the late 1980's, Standard & Poor's currently has public ratings on more than 100 issuers. In equity markets, Shariah-compliant versions of Standard & Poor's global and regional equity market indices - S&P 500, S&P Europe 350, S&P Japan 500 and S&P/IFCI GCC - have created new opportunities for Islamic investors to benchmark their international investments and for asset managers to create new investment products serving the Islamic community. Standard & Poor's Fund Services launched a qualitative fund management rating service for regional asset managers in 2007 assigning 17 Fund Management Ratings. For further details on Standard & Poor's regional capabilities please visit www.gcc.standardandpoors.com
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