Gulf Finance House, an Islamic investment bank, assigned 'BBB-/A-3' ratings; outlook stable

"The ratings on GFH reflect its solid capitalization, strong liquidity, robust financial performance, and unique position in its niche market," said Standard & Poor's credit analyst Anouar Hassoune.

These positive factors are balanced, however, by a short track record, relatively limited franchise and business diversification, and significant exposure to the Gulf region that might translate into earnings volatility.

GFH is an Islamic offshore banking unit based in the Kingdom of Bahrain (A/Stable/A-1) focusing on investment banking in the Middle East. With total assets of $1.3 billion at March 31, 2006, GFH is a small institution compared with international peers and therefore would be more exposed to departures of some key managers.

"We expect that GFH will remain adequately capitalized and liquid in the medium term," Mr. Hassoune said, "and benefit from the vast inflow of untapped and lucrative investment opportunities in a region witnessing unprecedented economic momentum, as the investment bank faces limited direct competition."

In the longer term, the ratings could be raised if the bank is successful in geographic and sector diversification, further expands its franchise, and builds up a longer record of recurring earnings.

A downgrade could occur if underwriting, reputation, or management disruption risks materialize, or if capitalization and liquidity excessively weaken.