TEXT - Fitch affirms British Arab Commercial Bank

Tue Feb 12, 2013 11:53am EST

Related Topics

Feb 12 - Fitch Ratings has affirmed British Arab Commercial Bank's (BACB)
Long-term Issuer Default Rating (IDR) at 'BB'. The Outlook is Stable. The
Viability Rating (VR) has been affirmed at 'bb'. A full list of rating actions
is at the end of this comment. 

RATING DRIVERS AND SENSITIVITIES - IDRs AND VR 

BACB's IDRs are driven by its intrinsic strength, as indicated by its VR. The VR
is constrained by the high-risk markets in which BACB operates, especially 
following the Arab Spring. The VR also takes into account significant 
concentrations, especially on the funding side: Libyan state-owned institutions 
provide virtually all of the bank's funding. However, sound liquidity management
and satisfactory capitalisation has helped protect the balance sheet from the 
high level of depositor concentration.

  

BACB's ratings could come under pressure if the situation in Libya significantly
worsened, or if the bank's strategic importance to its majority shareholders 
diminished - evidenced by a substantial withdrawal of deposits or business or 
both. Pressure on the ratings could also arise from a substantial deterioration 
in asset quality, although given the bank's focus on short-term trade-finance 
related lending, and its expertise in this area, Fitch does not anticipate 
further material deterioration in loan quality. 

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING

The Support Rating reflects that potential support from the bank's major 
shareholder, the Libyan Foreign Bank (LFB) is possible, and that the LFB has 
demonstrated support for BACB in the past, but this is not factored into the 
ratings. This is because it is difficult for Fitch to assess the ability to 
provide such  support on a timely basis as and when required given the current 
circumstances in Libya, and therefore the lowest Support Rating of '5' has been 
affirmed.

In the longer term, the Support Rating could be sensitive to a strengthening of 
the LFB's profile which, in addition to increased stability in Libya and a 
continued propensity to support BACB, could lead to an upward revision.

Established in 1972, London-based BACB is majority owned (83.5%) by the LFB. 
Aside from LFB, the Banque Centrale Populaire of Morocco and the state-owned 
Banque Exterieure d'Algerie of Algeria each own 8.26% of the bank's shares. 
BACB's core activities are trade finance, treasury, and banking services, 
focusing on the Middle East and Africa region. The bank is based in London and 
has representative offices in Algeria and Libya. 

The rating actions are as follows: 
Long-term IDR affirmed at 'BB'; Stable Outlook
Short-term IDR affirmed at 'B'
Viability Rating affirmed at 'bb'
Support Rating affirmed at '5'
FILED UNDER: