Bahrain-based Ahli United Bank B.S.C. outlook revised to stable; 'A-/A-2' ratings affirmed

At the same time, Standard & Poor's affirmed its 'A-' long-term and 'A-2' short-term counterparty credit ratings on the bank.

"The developing outlook had reflected potential rating actions that would have been triggered by a major change in AUB's ownership," said Standard & Poor's credit analyst Emmanuel Volland. "We now believe that the bank's ownership structure will not change materially in the foreseeable future."

The ratings on AUB reflect its leading commercial position in the Kingdom of Bahrain (A/Stable/A-1), better geographic diversification than for regional peers, improving financial performance, and strong asset quality. 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 creditworthiness. This reflects Standard & Poor's expectation of strong likelihood of extraordinary government support in case of need, given the bank's systemic importance in Bahrain stemming from its leading market position.

"The stable outlook reflects our expectation that AUB will maintain its leading commercial position in Bahrain and good geographic diversification, but also a capitalization level below that of peers,"

said Mr. Volland.

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