The Banking Executive Magazine - March 2022 Issue

Fitch FITCH UPGRADES GULF BANK'S VR TO 'BBB-'; AFFIRMS IDR AT 'A'; OUTLOOK STABLE Fitch Ratings has upgraded Gulf Bank K.S.C.P.'s (GB) Viability Rating (VR) to 'bbb-' from 'bb+'. Fitch has also affirmed the bank's Long-Term Issuer Default Rating (IDR) at 'A' with a Stable Outlook. The upgrade of GB's VR reflects the bank's improved risk profile and re- silient asset quality. KEY RATING DRIVERS GB's IDRs reflect potential support from the Kuwaiti authorities, if needed. This considers Kuwait's strong capacity to support the bank- ing system and its record of support- ing domestic banks. The Stable Outlook on GB's Long-Term IDR re- flects that on the Kuwaiti sovereign rating. The 'F1' Short-Term IDR is the lower of two options mapping to a 'A' Long-Term IDR because a significant part of GB's funding is related to the government and a stress scenario for GB would likely come at a time when the sovereign itself is experi- encing some form of stress. The VR reflects GB's good domestic franchise, cautious risk approach, re- silient asset quality, recovering prof- itability and stable funding despite high deposit concentration. The VR also considers only adequate capital- isation and high loan concentrations, albeit similar to peers. Government Support: The Kuwaiti authorities have strong ability and willingness to provide support to do- mestic banks irrespective of the bank's size, franchise, funding and level of government ownership. This view considers the authorities' record of support for the domestic banking system. High contagion risk among domestic banks is an added incentive for the state to provide sup- port to any Kuwaiti bank if needed, to maintain market confidence and stability. the BANKING EXECUTIVE 36 ISSUE 159 MARCH 2022