Long Term CRR: A1
Outlook: Not Assigned
Long Term Debt: (P) A2
Outlook: Not Assigned
LT Bank Deposits: A2
Outlook: Stable
Al Ahli Bank of Kuwait K.S.C.P.’s (ABK) Long Term Counterparty Risk Rating – Foreign Currency (A1), Long-Term Debt – Foreign Currency (P A2), and Long-Term Deposit Rating (A2), reflect Strong asset quality with low NPLs and very high provisioning coverage, comfortable liquidity with a good deposit base, and very high probability of government support in the event of need.
The stable outlook of Al Ahli Bank of Kuwait's long-term deposit ratings reflects the bank's strong asset quality metrics and high provisioning coverage.
No financial effect
Stable
Al Ahli Bank of Kuwait K.S.C.P.'s (ABK) A2 long-term deposit ratings benefit from four notches of government support uplift from the bank's baa3 Baseline Credit Assessment (BCA), which reflects our assessment of a very high probability of support from the Government of Kuwait (A1 stable) in the event of need.
ABK's standalone BCA of baa3 reflects its solid asset quality, substantial loan-loss reserves, sound capitalisation and ي, which together provide meaningful protection against potential asset-quality and liquidity risks. We consider these positive structural factors as adequate buffers for the bank to potentially absorb the effects from the Iran-USA conflict in the Middle East.
These strengths are balanced by modest, although improving, profitability, as well as elevated single-name credit concentration risks and exposure to relatively higher-risk sectors. The BCA also takes into consideration ABK's exposure to operations in relatively weaker operating environments, notably Egypt (Caa1 positive), which adds to the bank's risk profile despite contributing to earnings diversification, alongside structural funding risks stemming from its elevated loan-to-deposit ratio and a concentrated deposit base.
Credit Strengths
Solid asset quality supported by substantial loan-loss reserves.
Strong liquidity buffers supported by a stable deposit base.
Sound capitalisation providing meaningful loss-absorption capacity.
Very high probability of government support in the event of need.
Credit Challenges
Modest, although improving, profitability.
Elevated single-name credit concentration risks that make the bank vulnerable to the currently weak operating environment.
Structural funding risks from elevated loan-to-deposit ratio and concentrated deposit base.
Exposure to relatively weaker operating environments, notably Egypt.
Outlook
The stable outlook on ABK's long-term deposit ratings reflects the unchanged capacity of the Government of Kuwait to extend support to banks in case of need, as well as our expectation that the bank will maintain sound capitalisation, strong liquidity buffers and substantial loan-loss reserves, with profitability expected to recover after near-term pressure from a higher cost of risk stemming from the regional conflict.
Factors that could lead to an upgrade
Upward pressure on the bank's deposit ratings could stem from a sovereign rating upgrade. The bank’s BCA could face upward pressure in the event of a material and sustained strengthening of its standalone credit fundamentals, including enhanced profitability, improved asset quality, greater business diversification, or a meaningful reduction in concentration risks.
Factors that could lead to a downgrade
Downward pressure on the bank's deposit ratings could result from a sovereign rating downgrade. ABK's BCA could come under downward pressure should there be a significant deterioration in asset quality, profitability, or liquidity — particularly if driven by a prolonged disruption to economic activity stemming from the ongoing regional conflict. In addition, any material capital hit stemming from its foreign operations, could also trigger a BCA downgrade. A diminished willingness or capacity on the part of the government to provide support to the banking system would also weigh negatively on deposit ratings.
The issuer of this disclosure bears full responsibility for the soundness, accuracy, and completeness of the information contained therein. The issuer acknowledges that it has assumed Care of a Prudent Person to avoid any misleading, false, or incomplete information. The Capital Markets Authority and Boursa Kuwait Securities Exchange shall have no liability whatsoever for the contents of this disclosure.This disclaimer applies to any damages incurred by any Person as a result of the publication of this disclosure, permitting its dissemination through their electronic systems or websites, or its use in any other manner.