Fitch affirms Bahrain's Ahli United Bank at long-term IDR 'A-'; Outlook Stable

The Support Rating Floor is affirmed at 'A-' (A minus). The Long- and Short-term IDRs and Support rating reflect the extremely high probability of support for AUB from its core shareholders, in case of need. Its Individual rating reflects the bank's expanding franchise, healthy profit growth, sound liquidity and asset quality, and diversified funding. Its Tier 1 capital ratio (8.8% at end-2007 in accordance with Basel II) is modest by regional standards, but reflects the bank's view of maintaining an optimal mix of Tier 1 and Tier 2 capital. The Fitch eligible capital ratio, which includes equity credit for the bank's hybrid capital, stood at a more comfortable 11.9% at end-2007.

Downside risk to the IDRs is limited due to expected support, in case of need. Upside potential for the Individual rating could arise from an expansion of the bank's franchise and profitability, without jeopardising its risk profile. Downside risk could arise if asset quality were to deteriorate significantly or if the Tier 1 ratio were to be seriously eroded.

AUB was formed in 2000 through the merger of two banks based in the UK and Bahrain. The shareholders of the two banks swapped their shares for stakes in AUB, a newly established holding company in Bahrain. AUB absorbed the banking operation in Bahrain in 2005. AUB acquired stakes in banks in Kuwait (Bank of Kuwait & the Middle East - increased to 75% in 2005), Qatar (Ahli Bank - 40%), Egypt (Ahli United Bank Egypt, formerly Delta International Bank - 49.8%), Iraq (Commercial Bank of Iraq - 49.8%), and Oman (Alliance Housing Bank - 35%, since renamed Ahli Bank SAOG). It is also present in other Gulf and Middle Eastern countries through its brokerage subsidiary based in Kuwait.

Its strategy is to pursue selective expansion in the Gulf/Middle East, through organic growth and acquisition, to create a leading regional diversified financial services group, with an established platform in the UK and, potentially, Switzerland (focusing on wealth management). AUB is listed on the Bahrain and Kuwait stock exchanges. Its largest shareholders at end-June 2008 were the Government of Kuwait through the Public Institution for Social Security (19.5%), the Government of Bahrain through the Social Insurance Organisation (10.5%) and Tamdeen Investment Company (9.9%).