Rating action follows affirmation of the Kuwait government issuer rating, with a stable outlook
Limassol, May 30, 2017 -- Moody's Investors Service (Moody's) has today affirmed National Bank of
Kuwait S.A.K.P.'s (NBK) Aa3 and Kuwait
Finance House K.S.C.P.'s (KFH) A1 long-term
deposit ratings, and changed the outlook on these ratings to stable
from negative.
Today's rating action follows Moody's decision to affirm and
change the outlook on Kuwait's Aa2 government issuer rating to stable
from negative, as announced on 26 May 2017. Please see "Moody's
changes outlook on Government of Kuwait's Aa2 rating to stable from negative;
affirms rating "; https://www.moodys.com/research/--PR_366560.
A full list of affected ratings is provided below.
RATINGS RATIONALE
Moody's affirmation and change in outlook to stable from negative
on the banks' long-term deposit ratings is driven by the
affirmation and change in outlook to stable from negative on the Kuwait
government's Aa2 issuer rating. The banks' long-term
deposit ratings benefit from uplift resulting from Moody's expectation
of a very high likelihood of government support and are therefore sensitive
to changes in the creditworthiness of the Kuwaiti sovereign.
NBK's Aa3 long-term deposit ratings and the (P)Aa3 senior
unsecured rating of its funding subsidiary (NBK SPC Limited) benefit from
three notches of government support uplift, from the bank's
a3 standalone baseline credit assessment (BCA). KFH'S A1
long-term deposit ratings benefit from six notches of uplift from
the bank's ba1 BCA.
Moody's support assumptions take into account the capacity and willingness
of the government to provide extraordinary support to banks in case of
need. The affirmation of the sovereign rating with a stable outlook
indicates that this capacity is expected to remain unchanged. In
addition, in terms of willingness to support, Moody's maintains
a very high probability of support in case of need for the two banks,
given the Kuwaiti authorities' track record in supporting all banks encountering
difficulties and NBK's and KFH's high importance to the country's banking
system, as the two largest Kuwaiti banks by assets and deposits.
In addition, KFH is 49% owned by various Kuwaiti government
entities.
WHAT COULD CHANGE THE RATINGS UP/DOWN
According to Moody's, upward rating pressure on the banks'
ratings could develop following sustained improvement in operating conditions
for banks in Kuwait.
NBK's ratings could also come under upwards pressure if the bank
materially enhances its regional and global franchise and develops cross-border
synergies, while controlling host country risks, and reducing
balance sheet concentrations.
Additionally, positive pressure on KFH's ratings could develop
as a result of improvements in its financial performance and a successful
execution of its restructuring plan to address legacy issues and reduce
complexity.
Downwards pressure on the banks' ratings could develop from a significant
deterioration of domestic operating conditions, as captured in Moody's
Macro Profile for the country. Asset quality deterioration,
beyond the banks' historical through the cycle performance,
arising either from the banks' regional exposures or from the weakening
credit profile of large domestic customers, and/or a material deterioration
in the banks' capitalisation, profitability and liquidity
because of intrinsic factors would also exert negative rating pressure.
Lowering of Moody's government support assumptions would also place
negative pressure on the banks' ratings. Supported ratings
that are closer to the government level and benefit from a high degree
of support, such as NBK's and KFH's deposit ratings, are particularly
sensitive to changes in these assumptions.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
LIST OF AFFECTED RATINGS:
--- National Bank of Kuwait S.A.K.P.
- Long-term foreign currency and local currency deposit
ratings: affirmed at Aa3; outlook changed to stable from negative
--- NBK SPC Limited
- Backed long-term foreign currency senior unsecured MTN
rating: affirmed at (P)Aa3
Headquartered in Kuwait City, NBK reported total consolidated assets
of KWD24.8 billion (around $81 billion) as of March 2017.
--- Kuwait Finance House K.S.C.P.
- Long-term foreign currency and local currency deposit
ratings: affirmed at A1; outlook changed to stable from negative
Headquartered in Kuwait City, KFH reported total consolidated assets
of KWD16.4 billion (around $54 billion) as of March 2017.
The Local Market analyst for Kuwait Finance House K.S.C.P.
ratings is Nitish Bhojnagarwala, +971.4.237.9563.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Alexios Philippides
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Ltd.
Porto Bello Building
1, Siafi Street, 3042 Limassol
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 852 3758 1350
Client Service: 44 20 7772 5454
Sean Marion
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Cyprus Ltd.
Porto Bello Building
1, Siafi Street, 3042 Limassol
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 852 3758 1350
Client Service: 44 20 7772 5454
