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Finance & Banking | Global Arab Network
National Bank of Bahrain maintains confidence in a relatively small banking system
Global Arab Network - - Reda Darwish
Fitch Ratings has today affirmed National Bank of Bahrain's (NBB) Long-term foreign currency Issuer Default Rating (IDR) at 'A' with a Stable Outlook. Fitch has simultaneously affirmed NBB's Short-term foreign currency IDR at 'F1', Individual Rating at 'B/C', Support Rating at '1' and Support Rating Floor at 'A'.

NBB's IDRs and Support Rating reflect Fitch's view that there would be an extremely high probability of support from the Bahraini authorities if needed. This is because of the bank's leading status in the domestic market, the Government of Bahrain's 49% direct ownership and the authorities' ability and strong propensity to maintain confidence in a relatively small banking system. The Individual Rating reflects a leading domestic franchise, stable profitability, strong asset quality and customer funding base, and sound capital. It also considers NBB's reliance on a relatively small and competitive domestic market.

Despite a slowdown in Bahrain and across the wider region in 2009, NBB's profitability has held up well, with net income of BHD43m, up 23% on 2008. The bank had modest impairment charges in 2009 (mainly general in nature), given a continued conservative approach to its core businesses in Bahrain. NBB has also avoided exposures to riskier investment products and to the problems at two Saudi corporates (Saad and Al Gosaibi). Impaired loans are below 1% of the total loan portfolio and the bank has not had to make any specific impairment charges for many years. The net margin remained above 2.5% during 2009, while cost efficiency was good, with a cost/income ratio of 35.7%.

Funding is predominantly from a large and stable customer deposit base derived from its dominant domestic branch network. Liquidity remains satisfactory with a loans/deposits ratio of 76% at end-9M09, and a fairly large portfolio of interbank placements and treasury bills provide the bank with its main sources of liquidity, supported by marketable securities. NBB's regulatory capital ratios were adequate at end-9M09 with tier 1 at 16.1% (excluding year-to-date profits) and total capital at 21.2%. Fitch-eligible capital ratio was 22% at end-9M09.

NBB became the first locally registered bank in Bahrain in 1957. The Bahraini government acquired a 49% stake in 1973. NBB has a domestic network of 24 branches and 52 ATMs, branches in Abu Dhabi and Riyadh, and holds a licence to open a branch in Dubai. It has leading domestic market shares in Bahrain.

In Fitch's rating criteria, a bank's standalone risk is reflected in Fitch's Individual ratings and the prospect of external support is reflected in Fitch's Support ratings. Collectively these ratings drive Fitch's Long- and Short-term IDRs.

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