Bahrain-based Ahli United Bank B.S.C. assigned 'A-/A-2' ratings; Outlook developing

The outlook is developing.

'The ratings on AUB reflect its leading commercial position in Bahrain, better geographic diversification than for regional peers, improving financial performance, and strong asset quality,' said Standard & Poor's credit analyst Emmanuel Volland. 'The ratings are constrained by the bank's capitalization, which is below that of regional peers, rapid expansion strategy, and average funding profile.'

The long-term rating on AUB, a government-related entity under our methodology, includes a one-notch uplift above its stand-alone rating. This reflects Standard & Poor's expectation of strong likelihood of extraordinary government support in case of need, given the bank's systemic importance stemming from its leading market position. We classify the Kingdom of Bahrain (A/Stable/A-1) as interventionist toward its banking sector. (This policy only applies to 'retail' banks that are considered systemically important, however).

'The developing outlook reflects potential rating actions that could be triggered by a major change in AUB's ownership,' said Mr. Volland.

Although no transaction has been officially announced, Standard & Poor's understands that AUB's ownership structure could change in the near term, with a potential impact on the bank's strategy and capital policy.

'The future direction of the ratings will also largely depend upon the bank's capitalization, as this is currently the main constraining rating factor,' added Mr. Volland.

Ratings could be raised if capital ratios increased substantially while the group maintained its good asset quality and financial performance. A further decline in capital ratios or drastic deterioration in profitability would put downward pressure on the ratings, however.