Fitch affirms Ahli United Bank (UK) at Long-term IDR 'A-'; Outlook Stable

The Outlook on the Long-term IDR is Stable.

The Long- and Short-term IDRs and Support rating reflect the extremely high probability of support for AUBUK from its parent, Ahli United Bank ('AUB', 'A-'(A minus)/Outlook Stable), and ultimately from AUB's core shareholders, in case of need. The Individual rating reflects its consistent core profitability, improved asset quality, comfortable capital ratios and close integration with its parent. The rating also takes into account concentrations in loans and deposits as well as its comparatively small size and franchise.

Downside risk to the IDRs is limited due to potential support from its parent/ultimate shareholders. Upside rating potential is limited by the bank's size and franchise, but may arise if the bank succeeds in achieving higher profitability, while avoiding a deterioration in asset quality or capital ratios.

AUBUK is active in a number of specialised commercial banking areas such as commercial property lending and structured finance. Private banking and residential mortgage lending are targeted at Gulf nationals with business or personal interests in the UK or continental Europe. Based in London and regulated by the UK's Financial Services Authority, it was established in 1966 as the United Bank of Kuwait ('UBK') by a number of Kuwaiti institutions to provide access to the international markets. In 2000 UBK merged with a Bahrain-based bank to create AUB and UBK subsequently changed its name to AUBUK.

AUB subsequently acquired stakes in banks in Kuwait (Bank of Kuwait & the Middle East - 75%), Qatar (Ahli Bank - 40%), Egypt (Ahli United Bank (Egypt), formerly Delta International Bank - 49.8%) and Iraq (Commercial Bank of Iraq - 49.6%), and established a joint venture, based in Bahrain, together with two Iranian banks. AUB has also announced that it is likely to acquire a 35% stake in the Alliance Housing Bank in Oman, subject to obtaining the necessary regulatory approvals. Its strategy is to pursue selective expansion in the Gulf/Middle East to create a leading retail, corporate and private banking franchise, with a presence in the UK and potentially Switzerland.

AUB is listed on the Bahrain and Kuwait stock exchanges. Its largest shareholders at end-2006 were the Government of Kuwait through the Public Institution for Social Security (20%), Tamdeen Investment Company (13%) and the Government of Bahrain through pension funds (10%).