The upgrade is largely attributed to the Bank’s
enhanced capital position, stabilised asset quality and solid funding position
Manama, Bahrain: Standard & Poor’s Global Ratings (S&P) has
upgraded Bank ABC’s rating to “Stable” from “Negative”, while affirming its
long and short-term issuer credit ratings of ‘BBB-/A-3’. This revision comes on
the back of the Bank’s prudent capital enhancement and risk management actions
in recent months.
The outlook revision follows
the private placement of a US$390 million AT1 instrument in March 2022, which
was fully subscribed by the Bank’s largest shareholder, the Central Bank of
Libya. It also reflects the Bank’s moderated dividend distribution policy of
30% of net profits, allowing capital retention
to match asset growth. Such measures are expected to raise the Bank’s S&P
Risk Adjusted Capital (RAC) ratio to 10.3 -10.5%, compared to 9.6% at year-end
2021, which resulted from its acquisition of BLOM Bank Egypt. S&P have
therefore restored the assessment of capital and earnings to Strong (+1) on its
rating evaluation framework.
The revised rating also
reflects Bank ABC’s normalising asset quality, with non-performing loans
reduced to 3.4% of total loans at year-end 2021, compared to 5.2% the previous
year, moderating to pre-pandemic levels.
The Bank’s solid funding and
liquidity profile further contributed to its improved rating. Its highly
supportive principal shareholders, the Central Bank of Libya and Kuwait
Investment Authority, have a long track record of stability throughout economic
cycles and market stresses, which also mitigates the Bank’s exposure to
concentration risk.
Commenting
on the rating upgrade, Dr. Khaled Kawan, Group Chief Executive Officer, Bank
ABC said: “This outlook upgrade and affirmation of our ratings demonstrates the
success of the prudent capital and liquidity management approach of the Bank,
as it continues to expand its business model and pursue its strategic
aspirations.”