Standard and Poor's affirms NBK's long and short term credit ratings

S&P revised its outlook on NBK reflecting the weakening environment in which the bank operates, which is expected to put pressure on the bank's asset quality, financial performance, and ultimately on its stand-alone credit profile.

Although NBK has less exposure to problematic Kuwaiti investment companies than its domestic peers, we believe that this could increase pressure on its asset quality and profitability. In addition, oil prices and the domestic stock market have declined dramatically, and the global slowdown has had a negative impact on domestic economic growth (1.4% expected in 2009) and credit markets. The long-term rating on NBK, which we consider a government-related entity (GRE), is one notch higher than its stand-alone credit profile to reflect our expectation of extraordinary support from the government (classified as interventionist toward its banking sector) in case of need.

NBK is the largest bank in the State of Kuwait (AA-/Stable/A-1), with total consolidated assets of $41.3bn at year-end 2008. The bank has a consistent track record of leading domestic market share. It recently undertook a rapid overseas expansion to offset the major challenge of operating in an essentially mono-industrial country that is highly sensitive to oil-price fluctuations. We believe that the bank's rapid expansion strategy--notably in Turkey and Egypt--carries potential risks, especially at a time of global economic downturn. We understand, however, that NBK has decided to put its expansion strategy on hold.