Fitch Downgrades Gulf International Bank to 'A-'; Outlook Negative
OREANDA-NEWS. Fitch Ratings (Fitch) has downgraded Gulf International Bank B.S.C.'s (GIB) Long-Term Issuer Default Rating (LT IDR) to 'A-' from 'A'. The Outlook is Negative. A full list of rating actions is attached at the end of this rating action commentary.
The rating actions follow Fitch's downgrade of the Saudi Arabian sovereign (see 'Fitch Downgrades Saudi Arabia to 'AA-' from 'AA'; Outlook Remains Negative' dated 12 April 2016 on www.fitchratings.com). Following the sovereign downgrade, Fitch downgraded the LT IDRs of 7 Saudi Arabian banks, while revising downward the outlook of 4 others to Negative from Stable (see 'Fitch Downgrades 7 Saudi Arabian Banks; Revises Outlook of 4 Others to Negative on www.fitchratings.com).
The downgrade and Negative Outlook reflect Fitch's approach of rating GIB's Long-Term IDR one notch below the Saudi domestic systemically important bank (D-SIB) Support Rating Floor (SRF) of 'A' at 'A-'. The Negative Outlook mirrors that on the sovereign, meaning that GIB's IDR will be downgraded to 'BBB+' in the event of a downgrade by one notch of the Saudi sovereign.
GIB's Viability Rating (VR) remains unaffected.
KEY RATING DRIVERS
IDRs AND SUPPORT RATING
GIB's IDRs and Support Rating (SR) are driven by Fitch's expectation of an extremely high probability of support from the bank's longstanding majority shareholder, the Public Investment Fund of Saudi Arabia (AA-/Negative; 97.2% stake), despite the bank being licenced and headquartered in Bahrain. Our view of support is driven by the bank's ownership and a strong record of support, which has been clearly demonstrated in the past, and is the main reason GIB's LT IDR is in line with that of the smaller Saudi-domiciled banks.
Although the Central Bank of Bahrain regulates all licenced banks in Bahrain, Fitch does not factor any Bahraini sovereign support in the ratings of Bahraini wholesale banks, including GIB.
GIB's ratings are not constrained by the Bahrain Country Ceiling of 'BBB+', reflecting that the majority of GIB's assets and liabilities are outside of Bahrain, and would not be subject to Bahraini convertibility risks, in Fitch's view.
SENIOR UNSECURED DEBT
GIB's senior unsecured debt rating is aligned with the bank's LT IDR.
RATING SENSITIVITIES
IDRs and SR
GIB's IDRs and SR are sensitive to a diminishing of the perceived ability or willingness of the Saudi authorities to provide support to the bank. We consider that the willingness of the Saudi sovereign to support GIB is unchanged and is demonstrated by the authorities' strong track record of support. However, the Negative Outlook on the sovereign reflects a weakening ability of the sovereign to support GIB due to the significant deterioration in its fiscal position. GIB's LT IDR will be downgraded by one notch if the sovereign rating is downgraded.
As GIB's LT IDR is not constrained by the Bahrain Country Ceiling, its IDR is not sensitive to negative rating action on the Bahraini sovereign.
SENIOR UNSECURED DEBT
The senior unsecured debt rating is broadly sensitive to the same considerations that might affect GIB's LT IDR.
The rating actions are as follows:
Long-Term IDR downgraded to 'A-' from 'A'; Outlook Negative
Short-Term IDR downgraded to 'F2' from 'F1'
Viability Rating unaffected at 'bbb-'
Support Rating affirmed at '1'
Senior unsecured debt downgraded to 'A-' from 'A'
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