Fitch Ratings has affirmed Bank of Bahrain and Kuwait (BBK) rating for long-term issuer default at 'A-' with a stable outlook and short-term IDR at 'F2'.

The Bahrain-based bank's IDRs and support rating reflect the extremely high probability that the bank would receive financial support, if needed, given its significant local deposit market share, the government of Bahrain's 32 per cent indirect ownership, and the authorities' ability and strong propensity to maintain confidence in a relatively small banking system, said a Fitch report.

The individual rating reflects BBK's good domestic franchise, satisfactory profitability, improving asset quality and adequate liquidity and capitalisation.

It also reflects the bank's market risk exposure and reliance on a relatively small and increasingly competitive domestic market.

In the nine-month period in 2007, the bank's operating profits grew a modest seven per cent year-on-year to BD26 million ($69,1 million) and Fitch comprehensive income fell 32 per cent year-on-year to BD18 million as the bank suffered a BD 7million impairment charge for structured credit investments and a BD10 million loss in fair value of available-for-sale investments.

Given current adverse market conditions, some further losses may occur in the fourth quarter in 2007, the report said.

Nevertheless, profitability remained satisfactory as loan growth and related fee income recovered, after new regulations in 2005 had curbed growth in consumer finance and margins declined slightly but remained healthy. The cost efficiency too has shown modest improvement, the Fitch report said.