By Andy Sambidge
National Bank of Bahrain, BMI Bank and BBK all affected by downgrades amid kingdom unrest
Moody's on Monday said it has downgraded the long-term deposit ratings of three Bahraini banks in light of the recent social and political turmoil in the kingdom.
The ratings agency took action of the ratings of BBK, BMI Bank and National Bank of Bahrain.
The outlook on all of these ratings is negative, Moody's added in a statement.
The rating actions follow Moody's decision on May 26 to downgrade by one notch Bahrain's government bond rating to Baa1 and assign a negative outlook.
The bank ratings were lowered in light of "the deterioration in the banks' operating environment in light of recent social and political turmoil", Moody's said.
Moody's said it expects that the recent unrest and the consequent deterioration in the operating environment will "likely damage the country's growth prospects, thereby adversely impacting banks' asset quality, franchise strength and profitability over the near to medium term".
In terms of asset quality, Moody's said it expected "further weakening" in the real estate sector, which accounts for more than 30 percent of Bahraini banks' domestic lending.
"The poor expected performance of the hospitality and retail-trade sectors and higher domestic unemployment will also likely trigger an increase in non-performing loans over the near to medium term," Moody's said.
The ratings agency also expects that the slowdown in economic activity will limit business growth opportunities, which will, in turn, lead to increased competition for domestic banking franchises, constraining margins and overall profitability.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.