Limassol, April 01, 2020 -- Moody's Investors Service, ("Moody's") has
today placed on review for downgrade the Aa3 and A1 long term deposit
ratings of National Bank of Kuwait S.A.K.P.
(NBK) and Kuwait Finance House K.S.C.P. (KFH)
respectively.
A list of all affected ratings and assessments is provided at the end
of this press release.
RATINGS RATIONALE
-- REVIEW FOR DOWNGRADE ON LONG TERM RATINGS OF NBK AND
KFH REFLECT POTENTIAL WEAKENING IN GOVENRMENT SUPPORT CAPACITY
The primary driver of today's rating action is the potential weakening
of the Kuwaiti government's capacity to provide support in case
of need, as indicated by the review for downgrade on the government's
Aa2 issuer ratings. Please see the sovereign PR for details:
Moody's places Kuwait's Aa2 rating on review for downgrade (https://www.moodys.com/research/--PR_420408).
The banks' -- NBK and KFH - long term ratings and assessments
are the closest to Kuwaiti government's current ratings amongst
the Kuwaiti banks and are particularly sensitive to a scenario of more
than one notch downgrade of the Kuwaiti government's rating.
The Aa3 long-term deposit ratings of NBK are based on the bank's
standalone Baseline Credit Assessment (BCA) of a3 and our expectation
of a very high likelihood of support from the government of Kuwait ,
if needed, which currently translates into three notches of uplift
from the bank's BCA.
The A1 long-term deposit ratings of KFH are based on the bank's
BCA of baa3 and our expectation of a very high likelihood of support from
the government of Kuwait, if needed, which currently translates
into five notches of uplift from the bank's BCA.
RATING OUTLOOKS
The long term ratings and assessments of both NBK and KFH along with the
senior unsecured ratings on NBK's funding vehicles are placed on
review for downgrade.
In terms of governance considerations, Moody's does not have any
particular governance concern for the two Kuwaiti banks. The conservative
regulatory framework in Kuwait helps support the banks' governance practices.
LIST OF AFFECTED RATINGS
Issuer: Kuwait Finance House K.S.C.P.
..Placed on Review for Downgrade:
....Long-term Counterparty Risk Ratings,
currently A1
....Long-term Bank Deposits,
currently A1, outlook changed to Ratings under Review from Positive
....Long-term Counterparty Risk Assessment,
currently A1(cr)
..Outlook Action:
....Outlook changed to Ratings under Review
from Positive
Issuer: National Bank of Kuwait S.A.K.P.
..Placed on Review for Downgrade:
....Long-term Counterparty Risk Ratings,
currently Aa2
....Long-term Bank Deposits,
currently Aa3, outlook changed to Ratings under Review from Stable
....Long-term Counterparty Risk Assessment,
currently Aa2(cr)
..Outlook Action:
....Outlook changed to Ratings under Review
from Stable
Issuer: NBK SPC Limited
..Placed on Review for Downgrade:
....Backed Senior Unsecured Medium-Term
Note Program, currently (P)Aa3
....Backed Senior Unsecured Regular Bond/Debenture,
currently Aa3 outlook changed to Ratings under Review from Stable
..Outlook Action:
....Outlook changed to Ratings under Review
from Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Given that the ratings of NBK and KFH are on review for downgrade,
an upgrade is unlikely.
However, the ratings and assessments could be confirmed at the current
level, should the Kuwaiti government ratings were confirmed.
The banks' ratings and assessments placed on review for downgrade
could be downgraded in the event of a downgrade of the sovereign itself.
NBK is headquartered in Kuwait and has total assets of KWD29.2
billion (USD96.5 billion) at the end of December 2019.
KFH is headquartered in Kuwait and has total assets of KWD19.4
billion (USD63.9 billion) at the end of December 2019.
The local market analyst for these ratings is Nitish Bhojnagarwala,
+971 (423) 795-63.
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 https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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
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
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: 44 20 7772 5456
Client Service: 44 20 7772 5454
