Printer Friendly

Moody's places UAB ratings under review for downgrade; extends review for downgrade on NBO's ratings.

Moody's Investors Service, has today placed the baa3 adjusted baseline credit assessment (BCA) and Baa2 long-term deposit rating of United Arab Bank PJSC (UAB) under review for downgrade. Moody's has also placed the baa3 adjusted BCA of National Bank of Oman Limited (SAOG) (NBO) under review for downgrade, and extended the current review for downgrade on the bank's Baa1 long-term deposit rating.

This action follows the placement of the ratings of The Commercial Bank (Q.S.C.) (CBQK) under review for downgrade on seven March 2016. The action on CBQK (A1/Rating Under Review, Prime-1, BCA baa2) reflects both (i) the potential weakening of Qatar government's capacity to support the banks, as indicated by the review for downgrade on its issuer rating and (ii) the potential impact of weakening operating conditions on the bank's standalone credit profile (please see "Moody's takes rating actions on 26 GCC banks"). CBQK has a 40 per cent stake in UAB and a 35 per cent stake in NBO.

At the same time, Moody's has today affirmed the ba1 BCA of UAB and the ba1 BCA of NBO. This reflects Moody's view that the potential weakening in CBQK's creditworthiness does not affect the standalone credit profile of both affiliates.

The placement under review for downgrade of UAB's long-term ratings and the extensionof the review for downgrade on NBO's long-term ratings incorporate:

(i) The potential downwards change in Moody's affiliate support assumptions for UAB and NBO that could result from a downgrade in CBQK's BCA, and

(ii) The potential upwards reassessment in Moody's government support assumptions for UAB and NBO that could result from a lowering of our affiliate support assumptions.

UAB is a UAE bank with a one per cent market share in terms of total assets as of year-end (YE) 2015. NBO is an Omani bank with a 11 per cent market share in terms of total assets as of YE 2015.

United Arab Bank PJSC

The negative outlook on UAB's long-term ratings assigned on 17 February 2016 was in line with the negative outlook on the ratings of CBQK, indicating a potential weakening in the minority shareholder's capacity to support its affiliate UAB.

The review for downgrade on UAB's baa3 adjusted BCA and Baa2 long-term deposit rating is again in line with the review for downgrade now outstanding on CBQK's ratings, reflecting Moody's assessment that the minority shareholder capacity to support its affiliate UAB may weaken.

National Bank of Oman Limited (SAOG)

The review for downgrade on the long-term ratings of NBO initiated on three March 2016 is in line with the review for downgrade outstanding on Oman government's issuer rating, reflecting the potential for further decline in the government support capacity and Moody's potential reassessment of willingness of government support during the review period.

The review for downgrade on NBO's ratings now also incorporates the review for downgrade on CBQK's ratings, as indicated by the placement of NBO's baa3 adjusted BCA under review for downgrade. This reflects Moody's assessment that the minority shareholder capacity to support its affiliate NBO may weaken.

Moody's review for downgrade on UAB and NBO's ratings will also determine the extent to which an upwards reassessment of the government support assumptions for the banks insulates them from the need to downgrade the long-term deposit ratings as a consequence of lower affiliate support assumptions.

This reflects Moody's assessment of a lower probability of need for the government to extend support to banks already benefiting from affiliate support.

The affirmation of UAB and NBO's ba1 BCAs reflects Moody's assessment that the potential weakening in CBQK's creditworthiness - indicated by the review for downgrade on its ratings - does not affect the affiliates' standalone credit profile.

WHAT COULD CHANGE THE RATINGS UP

United Arab Bank PJSC

Upwards pressure on UAB's ratings is limited given the review for downgrade on its ratings.

An upwards reassessment of the UAE government support assumptions in the event of a reduction of the affiliate support assumptions at the end of the review period could result in an affirmation of UAB's ratings, despite a downgrade of the minority shareholder's BCA and long-term ratings.

National Bank of Oman Limited (SAOG)

Upwards pressure on NBO's ratings is limited given the review for downgrade on its ratings.

A stabilisation of Oman government issuer rating's outlook to stable at the end of the review period could stabilise the outlook on the NBO's ratings.

An upwards reassessment of the Oman government support assumptions in the event of a reduction of the affiliate support assumptions at the end of the review period could result in an affirmation of NBO's ratings, despite a downgrade of the minority shareholder's BCA and long-term ratings.

WHAT COULD CHANGE THE RATINGS DOWN

United Arab Bank PJSC

Downwards pressure on UAB's ratings could develop through (1) a weakening of the minority shareholder (CBQK)'s capacity to support UAB, as a rating downgrade of the minority shareholder's BCA at the end of the review period would imply; and/or (2) continued and significant weakening in asset risk and profitability metrics, and/or (3) a material decline in capitalisation buffers.

National Bank of Oman Limited (SAOG)

Downward pressure on NBO's ratings could develop through: (1) a further weakening of the Omani government's capacity to provide support, as a downgrade of Oman government's issuer rating at the end of the Sovereign review period would imply, and/or (2) a reassessment of the willingness of the government to provide support, which a shift in policy to protect the government's own creditworthiness would signal; and/or (3) a weakening of the minority shareholder (CBQK)'s capacity to support NBO, as a rating downgrade of the minority shareholder's BCA at the end of the review period would imply.

[c] 2016 CPI Financial. All rights reserved. Provided by SyndiGate Media Inc. ( Syndigate.info ).
COPYRIGHT 2016 SyndiGate Media Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2016 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:CPI Financial
Geographic Code:7OMAN
Date:Mar 23, 2016
Words:965
Previous Article:UGB holds its Annual General Ordinary and Extraordinary shareholders meetings.
Next Article:RAM Ratings expects MYR 100 billion--MYR 120 billion of domestic Sukuk issuance this year.
Topics:

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters