Bahrain Islamic Bank ratings cut
London, March 6, 2012
Moody's has cut Bahrain Islamic Bank's (BisB) supported issuer ratings to Ba3 / Not Prime from Ba1 / Not Prime following the rating agency's review for downgrade initiated in June last year.
In addition, Moody's has set the bank financial strength rating of BisB at E+, but changed its mapping on the long term scale to B3 from B1. All ratings carry a negative outlook, it added.
According to Moody's, the re-mapping of the BCA to B3 from B1 will reflect the recently aborted merger with Al-Salam Bank (ASBB). The bank faces renewed uncertainty regarding its future capital position.
'In our central scenario and taking into account expected losses on both financing and investment books, we estimate that the bank needs around BD40 million of fresh capital to repair its balance sheet,' Moody's said in its review.
A merger of these two banks would have been credit positive for BIsB given the stronger capital base of ASBB, it added.
Moody's pointed out that the Bahraini bank's supported issuer ratings were downgraded owing to the re-mapping of the BCA to B3 from B1.
The significant three-notch rating uplift incorporates our view that Bahraini authorities would likely support BisB's depositors in case of need due to the importance of BisB as the largest Islamic lender in the Kingdom of Bahrain, it added.
BisB's standalone ratings would come under pressure in case of (i) large and sudden withdrawals of customer deposits resulting from a loss of market confidence in the bank and/or (ii) a continued deterioration in the operating environment in the Kingdom, the ratings agency said.
BisB's issuer ratings could be downgraded if (i) standalone ratings were downgraded and/or (ii) the Central Bank of Bahrain failed to provide timely support to the bank in case of need or signalled any reduction in support for the banks in the country.
'The negative outlooks placed on BisB's ratings express our view that a further downgrade of the bank's ratings in the next 12 to 18 months is possible,' it added.
However, Moody's said the bank's standalone ratings could be upgraded in case the bank receives a significant capital injection or merges with a stronger institution, thus covering its expected losses.-TradeArabia News Service