Bahrain-based Gulf International Bank (GIB) got another boost when its credit rating was upgraded by Standard & Poors.

This follows an upgrading by Moody's earlier in the week.

Standard & Poor's Ratings Services said that it has affirmed its 'BBB+' long-term counterparty credit rating on GIB and removed it from CreditWatch negative where it was initially placed on February 10.

At the same time, the 'A-2' short-term counterparty credit rating was affirmed. The outlook is stable.

The rating action reflects the recent sale of a significant portion of GIB's investment securities portfolio to its shareholders, estimated to have taken $4.8 billion of possibly risky investments off the bank's balance sheet.

'The sale of $4.8 billion of securities, mainly asset-backed, had a positive impact on GIB's asset quality, liquidity, and capitalisation,' said Standard & Poor's credit analyst Goeksenin Karagoez.

'We also factored in the bank's intention to further reduce its leverage and strengthen its funding profile.

'The ratings on GIB reflect the bank's strong ownership structure, adequate asset quality, although assets are geographically concentrated, and improved liquidity and capitalisation.

'The ratings on the bank are constrained by its weak profitability, reliance on short-term wholesale funding, and challenges regarding the bank's future strategy. The bank intends to amend its business model and improve its funding profile but its ability to achieve this has yet to be demonstrated.

'The stable outlook reflects our belief that GIB will continue to benefit from strong support from shareholders and maintain its improved asset quality and capitalisation,' said Karagoez.

'We could lower the ratings if the bank fails to adjust its business model to the new environment and maintain the adequate quality of its loan book and a satisfactory capitalisation.

GIB is a merchant bank focusing on the Gulf market.-TradeArabia News Service