Limassol, May 12, 2008 -- Moody's Investors Service today placed the Baa3/Prime-3 deposit ratings, Ba1 subordinated debt rating and D+ bank  financial strength rating ("BFSR") of United Gulf Bank ("UGB") on review  for possible downgrade.

This action follows the announcement by UGB that it has agreed to sell four commercial banking subsidiaries and associates to Kuwait's Burgan  Bank (rated A1/Prime-1/C-) for US$725.0 million. UGB will be selling its  stakes in Algeria Gulf Bank, Bank of Baghdad, Jordan Kuwait Bank and Tunis International Bank. The transaction is pending regulatory approvals  in Bahrain, Kuwait and other relevant markets and is expected to be  completed in the third quarter of 2008. UGB and Burgan Bank are both majority-owned by the KIPCO Group (Kuwait), with respective stakes of 88% and 52%.

Moody's said that the rating review is initiated in response to the anticipated change in UGB's business mix and earnings profile as a result of this transaction, which appears to change UGB's strategy of becoming a regional universal bank in favour of a more focused investment banking profile. UGB's primary operations will remain asset management (through its subsidiary KAMCO) and proprietary investments. In 2007 UGB's commercial banking subsidiaries contributed about US$50 million to the bank's overall profits and were projected to account for approximately one third of annual profits over the medium term.

During the review period, Moody's will focus on how UGB chooses to reinvest the sales proceeds and this is likely to determine whether there will be an eventual change in the bank's ratings. Moody's considers the most likely scenario to be an acquisition or investment that replaces the revenues generated by UGB's commercial banking operations with a comparable volume of stable, customer-sourced earnings leading to the confirmation of the bank's ratings. Conversely, the payment of a large dividend to shareholders or an investment in activities that significantly raises the bank's risk appetite could have negative rating implications.

Moody's review will also focus on how UGB's reinvestment decision will impact the bank's funding profile and capitalisation and will take into account the likely generation of a large capital gain as a result of the sale transaction.

Finally, Moody's will also consider the possible implication of the transaction with regard to the parental support assumptions for the bank.

Currently UGB's Baa3/Prime-3 deposit ratings incorporate an uplift reflecting a moderate likelihood of support from its shareholders, to be distributed through Burgan Bank.

United Gulf Bank is headquartered in Manama, Bahrain, and had total assets of US$2.67 billion at the end of December 2007.

-Ends-

For more information please contact:
Limassol
Mardig Haladjian
General Manager
Financial Institutions Group
Moody's Investors Service Cyprus Limited
Journalist: 44 20 7772 5456
Subscribers: 44 20 7772 5454

Limassol
George Chrysaphinis
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Limited
Journalist: 44 20 7772 5456
Subscribers: 44 20 7772 5454

© Press Release 2008