Bahrain-Based Gulf International Bank B.S.C.'s $4 Billion Euro Medium-Term Note Program Rated 'BBB+/A-2'

Published November 23rd, 2009 - 03:19 GMT

 Standard & Poor's Ratings Services said today that it has assigned its 'BBB+/A-2' long- and short-term senior unsecured debt ratings to the $4 billion Euro medium-term note (EMTN) program recently launched by Gulf International Bank B.S.C. (GIB; BBB+/Stable/A-2), a wholesale bank headquartered in Bahrain.

The ratings on the program (for senior notes) are equalized with the counterparty credit ratings on GIB, reflecting our view that the notes will rank pari passu with GIB's other senior unsecured debt.

The ratings on GIB reflect the bank's strong ownership structure, adequate asset quality (although assets are geographically concentrated), and improved liquidity and capitalization following the sale of impaired and high-risk assets. The ratings on the bank are constrained by its weak profitability, reliance on short-term wholesale funding, and challenges regarding the bank's future strategy. The bank intends to amend its business model and improve its funding profile but has yet to demonstrate its ability to achieve this.

The long-term rating on GIB is two notches above the bank's stand-alone credit profile to reflect Standard & Poor's view that there is a moderately high likelihood of extraordinary government support from the Kingdom of Saudi Arabia (AA-/Stable/A-1+). Since the asset sale in March 2009, the Saudi Arabia Monetary Agency (SAMA, the central bank) and Public Investment Fund (PIF), two public institutions in Saudi Arabia, together own a 98% stake in GIB. We consider GIB as a government-related entity (GRE) under our methodology, whereas we classify Saudi Arabia as interventionist toward its banking sector.

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