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Rating Action:

Moody's affirms the ratings of Gulf International Bank BSC, changes outlook to stable from negative

09 Nov 2021

Rating action follows the affirmation of Saudi Arabia's government bond rating at A1 with a stable outlook

Limassol, November 09, 2021 -- Moody's Investors Service, ("Moody's") has today affirmed the long-term deposit and senior unsecured debt ratings of Gulf International Bank BSC (GIB) at Baa1. Concurrently, Moody's has also affirmed the bank's Baseline Credit Assessment (BCA) and Adjusted BCA at ba2. The agency has also affirmed the long-term Counterparty Risk Rating and Counterparty Risk Assessment at Baa1 and Baa1(cr) respectively. At the same time, Moody's has changed the outlook on the long-term deposit and senior unsecured debt ratings to stable from negative.

The rating action follows Moody's decision to affirm and change the outlook to stable from negative on the Saudi Arabian government's A1 issuer rating on 5 November 2021 and indicates the rating agency's expectation that the capacity of the Saudi authorities to extend financial support to the bank will remained unchanged. For further information on the sovereign rating action, please refer to Moody's press release: Moody's changes Saudi Arabia's outlook to stable, affirms A1 ratings (https://www.moodys.com/research/--PR_456348).

GIB is licensed as an offshore (wholesale) bank in Bahrain and operates mainly in the six countries of the Gulf Cooperation Council although more than 50% of its lending activity is in Saudi Arabia.

Please refer to the end of this press release for a list of all affected ratings.

RATINGS RATIONALE

AFFIRMATIONS OF RATINGS AND ASSESSMENTS

Moody's decision to affirm the long-term deposit ratings of GIB reflects the resilience of the bank's BCA at the current ba2 level. This takes into account the bank's solid capital with tangible common equity/risk-weighted assets of 12.9% as of June 2021, and sound liquidity buffers with liquid assets representing around 61% of total tangible assets as of the same period. These strengths are offset by GIB's relatively still elevated - albeit reducing - volume of nonperforming loans (NPLs) close to 3.3% of total loans as of June 2021 (3.4% in 2020 and 5% in 2019) and weak profitability. The bank's BCA also reflects its high loan and funding concentrations.

The bank's long-term deposit rating continues to incorporate Moody's assumption of a very high likelihood of support from the Government of Saudi Arabia (A1 stable), as a result of the government's 97% shareholding in GIB, held through the Public Investment Fund, and the shareholder's track record of pre-emptive support for the country's banks in case of need.

OUTLOOK CHANGED TO STABLE

Moody's decision to change the outlook to stable from negative captures the resilience of the operating environment in Saudi Arabia and the expectation that the capacity of the government to provide support in case of need, as implied by Moody's affirmation of the A1 Saudi government issuer rating and change in outlook to stable from negative on 5 November 2021, will remain unchanged.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Upward pressure on GIB's rating could develop from (1) significant and sustained improvement in its asset quality; (2) significant improvement in its profitability; and (3) larger and meaningful contribution of the retail business to profitability and funding.

Downward pressure on GIB's ratings could result from (1) a downgrade of the Saudi Arabian government bond rating that would indicate reduced support capacity or any reassessment of the willingness of the government to support GIB; and/or (2) a deterioration in the main operating markets where the bank conducts its business resulting in a weakening in solvency and liquidity that could exert pressure on the bank's standalone assessment (BCA).

LIST OF AFFECTED RATINGS

Issuer: Gulf International Bank BSC

..Affirmations:

....Long-term Counterparty Risk Rating, affirmed Baa1

....Short-term Counterparty Risk Rating, affirmed P-2

....Long-term Bank Deposits, affirmed Baa1, outlook changed to Stable from Negative

....Short-term Bank Deposits, affirmed P-2

....Long-term Counterparty Risk Assessment, affirmed Baa1(cr)

....Short-term Counterparty Risk Assessment, affirmed P-2(cr)

....Baseline Credit Assessment, affirmed ba2

....Adjusted Baseline Credit Assessment, affirmed ba2

....Senior Unsecured Regular Bond/Debenture, affirmed Baa1, outlook changed to Stable from Negative

....Senior Unsecured Medium-Term Note Program, affirmed (P)Baa1

....Subordinate Medium-Term Note Program, affirmed (P)Baa3

..Outlook Action:

....Outlook changed to Stable from Negative

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

The local market analyst for this rating is Badis Shubailat, +971 (423) 795-05.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Christos Theofilou, CFA
Vice President - Senior 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: 44 20 7772 5456
Client Service: 44 20 7772 5454

Henry MacNevin
Associate Managing Director
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: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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