Fitch affirms ABK at 'A-'/'F2'; Outlook Stable

The Support Rating Floor is affirmed at 'A-' (A minus). The Outlook for the Long-term IDR is Stable.

ABK's IDRs and Support rating reflect the extremely high probability of support from the Kuwaiti authorities, in case of need. The Individual rating reflects its consistent and sound profitability, good asset quality profile and adequate capitalisation, while also considering a limited but growing franchise, high loan and deposit concentration levels and ABK's reliance upon its small and competitive domestic operating environment.

ABK's profitability is sound and has been improving consistently in recent years, although 2007's performance was slightly lower than the previous year's. Higher funding costs reduced the bank's net interest margin in 2007, although interest revenues remained strong. Non-interest revenues, while up yoy, were reliant on a one-off gain on the sale of land (KWD14m) to be so. Cost efficiency remains good, while new impairment charges were fairly low.

Asset quality ratios remain good, having shown continuous improvement since 2000. Post-liberation impaired loans represent just 1.2% of the bank's total loan portfolio. Pre-invasion loans remain on the books, but are 100% provided against. Continuing rapid loan growth (38% in 2007) could lead to new asset quality problems in the future. Concentrations exist in the loan portfolio, particularly in exposures to property. Regulatory and Fitch eligible capital ratios remain adequate at 14%.

ABK was founded in 1967. Its major shareholder, with 35.6%, is the Behbehani family, who have a wide range of other business interests. ABK is a medium-sized bank based in Kuwait. Its franchise is geared to commercial/corporate banking, although it has targeted retail banking for future expansion. Its growing international activities primarily relate to Gulf Cooperation Council (GCC) trade finance.