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Standard & Poor's Takes Various Rating Actions On Tunisian Banks

Thursday, 20 January 2011 23:23

Tunisia (Tunis) - Standard & Poor's Ratings Services said it took various rating actions on the following banks in Tunisia:
* We lowered the long- and short-term ratings on Banque de l'Habitat (BH) to 'BB+/B' from 'BBB-/A-3' and placed the long-term rating on CreditWatch with negative implications in line with our criteria for government-related entities (GREs).
* We placed our 'BB' long-term rating on Banque de Tunisie et des Emirats (BTE) on CreditWatch with negative implications and affirmed the 'B' short-term rating in line with our GRE criteria.
* We placed the 'BB+' long-term rating on Banque Tuniso - Koweitienne (BTK) on CreditWatch with negative implications.
* We placed the 'BB+' long-term rating on Arab Tunisian Bank (ATB) on CreditWatch with negative implications and affirmed the 'B' short-term rating;
* We affirmed the 'BBpi' rating on Société Tunisienne de Banque(STB) in line with our GRE criteria.

These rating actions equally apply to all of Standard & Poor's ratings on these banks' debt instruments, Global Arab Network reports according to a press statement.

The actions follow the recent rating actions on the Republic of Tunisia (foreign currency BBB/Watch Neg/A-3, local currency BBB+/Watch Neg/A-2). For further details see "Republic of Tunisia Ratings Put On Watch Negative On Continuing Uncertainty; Local Currency Rating Lowered To 'BBB+'," published on Jan. 18, 2011, on RatingsDirect.

Specifically, today's actions on Tunisian banks reflect our view of:

* The risk of a deterioration of the sovereign's creditworthiness, which we believe could affect the financial capacity of the government to provide extraordinary support if need be to GREs, notably BH and BTE; and
* The risk that economic growth prospects could weaken materially following the recent weeks of unrest, which culminated with the departure of President Ben Ali on Jan. 14, 2011. In our opinion, this turmoil is likely to have a negative impact on rated banks' financial profiles, especially their asset quality and profitability, but potentially also their liquidity positions.

Banque de l'Habitat (BB+/Watch Neg/B)

The ratings on BH primarily reflect our view that there is a "high" likelihood of support from its majority owner, the government of Tunisia, which directly and indirectly owns 58% of the bank. This provides the bank with an uplift of two notches above its standalone credit profile, from three notches previously, according to our GRE criteria. The lowering of the long-term local currency rating on Tunisia indicates, among other things, that we believe the financial means of the government has already started to weaken following the recent weeks of unrest in Tunisia. We therefore consider that the government's capacity to financially support BH in case of need has diminished.

We believe that further pressure both from potentially reduced availability of government support and on BH's future financial profile, especially its asset quality, cannot be ruled out, as indicated by our CreditWatch negative placement on the long-term rating on the bank.

Banque de Tunisie et des Emirats (BB/Watch Neg/B)

The ratings on BTE primarily reflect our opinion of a "moderate" likelihood of support from its co-owner, the government of Tunisia, which owns 38.9%. The Abu Dhabi Investment Authority (ADIA; not rated) also owns a 38.9% stake in BTE. This provides the bank with an uplift of one notch above its standalone credit profile, according to our GRE criteria. Our CreditWatch placement with negative implications on the bank's long-term rating indicates that we expect further pressure both from the potentially reduced availability of government support and on BTE's future financial profile.

Banque Tuniso-Koweitienne (BB+/Watch Neg/--)

The ratings on BTK primarily reflect its strategically important status to French bank BPCE (A+/Stable/A-1), which owns 60% of BTK. This provides the bank with an uplift of two notches above its standalone credit profile, according to our group methodology. Our CreditWatch placement with negative implications on the bank's long-term rating indicates our view that there is potential for further pressure on the bank's financial profile, notably its asset quality, which could deteriorate because of growth of its loan portfolio in recent quarters above that of peers. Support from highly rated and committed parent BPCE could help to mitigate these pressures, in our opinion.

Arab Tunisian Bank (BB+/Watch Neg/B)

The ratings on ATB primarily reflect its strategically important status to Jordan-based Arab Bank PLC (BBB-/Stable/A-3, operating entities rated 'A-'), which owns 64.2% of ATB. This provides the bank with an uplift of two notches above its standalone credit profile, according to our group methodology. Our CreditWatch placement with negative implications on the bank's long-term rating indicates our view of potential further pressure on the bank's financial profile, notably its asset quality. We note that ATB has so far exhibited a superior financial profile compared with other rated banks in Tunisia, notably with respect to liquidity, operating performance, and asset quality. Support from its highly rated and committed parent Arab Bank could help mitigate these pressures.

Société Tunisienne de Banque (BBpi)

The pi rating on STB primarily reflects our view that there is a "high" likelihood of support from its majority owner, the government of Tunisia, which directly and indirectly owns 52.5% of the bank. This provides the ratings on the bank an uplift of one category above its standalone credit profile, according to our criteria. We typically do not use modifiers, outlooks, or CreditWatch placements for public information (pi) ratings. We recognize, however, that STB is also likely to suffer from deteriorating asset quality, which we already consider as weaker than peers, and profitability. Furthermore, we view STB's capitalization as weak.

We expect to resolve the CreditWatch status on the banks within the next three months, in line with that on the sovereign. A CreditWatch listing also does not mean a rating change is inevitable, although the rating outcome will depend to a certain extent on our updated opinion of the sovereign creditworthiness. However, it will also depend on our updated assessment of the banks' future standalone credit profiles, notably:

* The magnitude of any potential deterioration in asset quality and domestic profitability in 2011-2012;
* The banks' capital positions and other sources of additional financial flexibility, notably parental or government support;
* The banks' strategy to overcome likely funding challenges and subsequent implications for their liquidity positions.

Global Arab Network

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