Moody's reviews ratings of two Bahraini banks

The National Bank of Bahrain and BBK have been placed on review for downgrade by ratings agency Moody's.

At the same time, the ratings of a third Bahraini retail bank, BMI BSC, were affirmed at Baa2, according to a media release.

Moody's has stressed that the reviews for downgrade are part of Moody's global review of systemic support available for banking systems and are not driven by any reassessment of Bahraini banks' standalone financial strength.

George Chrysaphinis, Vice President - Senior Analyst at Moody's said, "Although Bahraini banks' asset quality metrics are expected to deteriorate over the next few months, Moody's recognises that Bahraini banks maintain very strong capital levels and adequate profitability that can absorb growing loan losses. This will help the banks sustain their overall financial strength."

"Under Moody's bank rating methodology, local currency deposit ratings incorporate banks' intrinsic financial strength, (ii) the likelihood of shareholder support (if any) and the financial strength of the shareholder, and (iii) the likelihood of systemic support (if any) and ability of national governments to support banks."

Moody's will be reassessing the level of systemic support for Bahraini banks to determine whether the systemic support they receive needs to be more closely aligned to the government's local currency bond rating.

Factors that Moody's will consider in its assessment of systemic support include the size of the banking system in relation to the Bahraini government resources, the level of stress in the banking system and the foreign currency obligations of the banking system relative to the government's own foreign exchange resources, the note added.

Moody's placed on review for possible downgrade the ratings of two Bahraini retail banks - National Bank of Bahrain BSC's long-term local currency rating of A1 and BBK BSC's local and foreign currency ratings of A2/Prime-1 as well as its A2 senior and A3 subordinated debt ratings within the context of Moody's global review of systemic support available for banking systems.

Headquartered in Manama, Bahrain, National Bank of Bahrain reported total assets of BHD2.04 billion ($5.430 billion) as at September 2008.

BBK reported total assets of BHD2.16bn ($5.760bn) as at December 2008, while BMI reported total assets of BHD814.86 million ($2.14bn) as at December 2008.

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