Capital Intelligence assigns ratings to AWAL Bank B.S.C.

The financial strength rating assigned was also BBB+ and the support rating 3.

Awal Bank commenced operations in August 2004 under a wholesale banking licence from the Central Bank of Bahrain (CBB). The bank forms an increasingly important part of the Saad Group, one of Saudi Arabia's leading business conglomerates. It enjoys very strong ownership as clearly evidenced by the large increases in shareholders' equity during the short period of time since its establishment. Since inception, the bank has more than quadrupled both its balance sheet and equity base through substantial injections of fresh capital and full retention of earnings. Total equity reached USD1.6 billion as at end June 2007.

Moreover, profitability has been robust from the first year of operation, and remains so. Profitability however is dependent on potentially volatile fair value investment gains reflecting the dominant securities portfolio coupled with the current limited scope of other operations. Although there is some asset concentrations within equities, overall asset quality is sound reflecting a liquid securities portfolio that is well diversified by geography and across asset classes (mainly investment grade floating rate notes, hedge funds and blue chip equities).

Due to the relatively short track record, Awal Bank faces challenges as it builds its wholesale banking franchise within the region in the face of very keen competition from established institutions in the GCC. Given the buoyant economic conditions in the GCC however, CI believes that over time Awal Bank will achieve a deeper operational base which in turn will diversify the earnings stream.