Three Lebanese Banks long-term ratings remain on CreditWatch negative

The 'B-' long-term counterparty credit ratings on Blom Bank sal, Bank Audi SAL - Audi Saradar Group, and Bankmed, s.a.l. remain on CreditWatch with negative implications, where they had originally been placed on July 14, 2006.

At the same time, the 'C' short-term counterparty credit ratings on Bank Audi SAL - Audi Saradar Group and Bankmed were affirmed.

The long-term ratings on these banks were placed on CreditWatch with negative implications, following the same rating action on the Republic of Lebanon (B-/Watch Neg/C). Today's announcement follows recent discussions with Lebanese banks and regulators, as part of our ongoing surveillance.

"Standard & Poor's considers that the Lebanese banking sector is currently weathering the storm thanks to their strong liquidity position, long experience of dealing with crises, and good coordination with the Central Bank of Lebanon (CBL) and the Banking Control Commission (BCC)," said Standard & Poor's credit analyst Emmanuel Volland.

"The total financial impact of the crisis on the country and the banking sector is unknown, but the cost will be exacerbated if the crisis continues or worsens," added Mr. Volland.

Challenges facing the banking sector are likely to be a depressed operating environment with a low level of confidence, triggering pressure on asset quality, and a very high direct exposure to a very indebted sovereign with even less fiscal room to manoeuvre.