Fitch affirms Commercial Bank of Kuwait at 'A'; outlook stable

The rating Outlook on the Long-term IDR is Stable. The Support Rating Floor is affirmed at 'A'.

CB's Issuer Default and Support ratings reflect expected support from the Kuwaiti authorities, in case of need. The Individual rating reflects the bank's good domestic franchise, consistently strong profitability and healthy asset quality, but also takes into account relatively high concentrations in its loan and funding profile, some exposure to local/regional equities and the bank's reliance on a small and undiversified economy. The Individual rating could suffer in the event of a further weakening of capital ratios or future asset quality deterioration after strong recent loan growth.

CB's profitability is strong, driven by solid loan growth, a wide net interest margin and sector-leading cost-efficiency. The bank's loan book grew by a steep 25% in H107. Much of the loan growth came from the real estate, construction, and financial sectors. Given rapid appreciation in property prices in Kuwait, strong loan growth in these areas may be a cause for concern and requires close monitoring. Margin lending represented a high 19% of gross loans at end-June 2007 and could be at risk if currently high levels of collateral were rapidly eroded by falling stock-market valuations.

CB was the fourth-largest bank in Kuwait by total assets at end-2006. It serves retail and corporate customers. CB currently has the second-largest branch network in Kuwait (48 branches), which gives it a strong position in the local retail banking market.