TEXT - Fitch affirms British Arab Commercial Bank
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'