Bahrain-Based Gulf International Bank B.S.C. 'A-/A-2' ratings affirmed, outlook stable

The outlook is stable.

"The affirmation balances the bank's announced loss related to large write-downs on its securities portfolio with the $1.0bn capital increase to be received in March," said Standard & Poor's credit analyst Emmanuel Volland.

The loss results from the bank's large exposure to structured asset classes and the deteriorated global market conditions that have prevailed since summer 2007. The bank wrote down $965.7m in structured investment vehicles (SIVs), residential mortgage-backed collateralized debt obligations, and other structured assets, resulting in a net loss of $757.3m in 2007.

"We welcome the $1.0bn capital increase," said Mr. Volland. "Apart from rebuilding the bank's capital base, it is also proof of shareholders' strong support and commitment toward GIB."

The stable outlook reflects Standard & Poor's expectation that GIB will continue to benefit from the commitment of its shareholders and a strong commercial position in the Gulf region. The bank's prospects match those of the Gulf Cooperation Council countries, which largely depend on the performance of the oil and natural gas sector. Standard & Poor's does not expect GIB's business model to significantly change, although investment policy is set to become more conservative. Should the bank's core profitability deteriorate, loan quality materially worsen, or financial leverage become excessive, the ratings could face downward pressure.