Fitch places Jordan’s Arab Bank on rating watch negative on MENA risks

By bne IntelliNews July 12, 2013

Fitch put Arab Bank (A-), Jordan’s largest bank, on rating watch negative due to rising risks linked to the bank’s operations across the MENA region, mainly in the 'Arab Spring' countries, the rating agency stated.

The underlying risks are increasing amid the regional political unrest and economic slowdown, Fitch said. Arab Bank has reportedly managed the regional impact so far but the underlying credit quality of the bank's investments in MENA has weakened.

Fitch said it will review Arab Bank’s key rating drivers and decide on the credit watch negative within the next three months. A downgrade of the bank's long-term ratings by more than one notch is possible, Fitch warned.

The agency underscored Arab Bank’s strengths including “the bank's conservative overall risk appetite for the region, its solid capitalisation, stable funding, strong liquidity and cautious liquidity management.”

The bank's profitability is “currently sound and consistent,” Fitch said. But profitability reportedly remains vulnerable to downside risks given the uncertain operating environment in some of the bank's main markets.

Fitch reckoned that government support, if required, is possible, but given Arab Bank's size, cannot be relied upon. The bank has several core shareholders, “but it is difficult to assess their willingness and ability to provide support at all times,” Fitch noted.

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