Capital Intelligence downgrades Awal Bank B.S.C. and withdraws coverage

The rating action follows Awal Bank's decision to initiate restructuring of its financial obligations to other banks and financial institutions. The financial strength rating is also lowered to 'D'.

Concurrently, upon Awal Bank management's request, Capital Intelligence withdraws the ratings.

Although management decline to comment, Awal Bank's plan to initiate debt restructuring with creditors appears to be related to liquidity problems at various other Saad Group companies in Saudi Arabia and to have been precipitated indirectly by the recent default of The International Banking Corporation, a Bahrain-based wholesale bank wholly owned by the Ahmad Hamad Algosaibi and Brothers Company in Saudi Arabia.

Press reports had earlier said that the Saudi central bank had issued a directive requiring Saudi banks to freeze the assets of Mr Maan Al-Sanea, the chairman of Saad Group (and Awal Bank) and the largest shareholder of Awal Bank. Capital Intelligence has not been able to confirm these reports as the circumstances surrounding the regulatory freeze have not been made public.

A substantial $2.2bn of Awal Bank's total liabilities at end 2008 are in the form of short-term deposits from banks and other financial institutions in the GCC and Europe.

Established in 2004 Awal Bank has grown substantially over the last four years aided by large increases in shareholders' equity. With total assets of $7.6bn and total capital of $2.7bn at end 2008 the Bank ranks among the medium sized wholesale institutions in the Bahraini market.

Although it operated primarily along the lines of an investment company its principal activities were ultimately to comprise a full range of wholesale banking services including corporate and trade finance, commercial lending and acceptance of customer deposits.