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Fitch Affirms Ahli United Bank (UK) PLC at 'BBB+'; Outlook Stable
September 1, 2014 / 2:47 PM / 3 years ago

Fitch Affirms Ahli United Bank (UK) PLC at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) LONDON, September 01 (Fitch) Fitch Ratings has affirmed Ahli United Bank (UK) PLC's (AUBUK) Long-term Issuer Default Rating (IDR) at 'BBB+' with a Stable Outlook and Viability Rating (VR) at 'bbb-'. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS - IDRS AND SUPPORT RATING AUBUK's IDRs and Support Rating reflect Fitch's expectation of a high probability of support from its parent, Bahrain-based Ahli United Bank BSC (AUB; BBB+/Stable/bbb), and ultimately from AUB's core shareholder, the Public Institution for Social Security (PIfSS), an arm of the State of Kuwait (AA/Stable). AUB's ratings are in turn driven by Fitch's expectation of support from PIfSS, which owns 18.5% of the bank, but are constrained by Bahrain's 'BBB+' Country Ceiling. The strong links between PIfSS and AUBUK date back to before the creation of AUB in 2000 and are supported by PIfSS's shareholdings in both AUB and its subsidiary, Ahli United Bank Kuwait (12.2% stake). Fitch believes that the propensity and ability to support AUBUK remain high. This view is underpinned by AUBUK's core role within the AUB group, as the sole operation outside of the Middle East and North Africa (MENA) region. It also considers AUB's sole ownership of AUBUK and the strong track record of support for banks in Kuwait and the Gulf region. RATING SENSITIVITIES - IDRS AND SUPPORT RATING AUBUK's IDRs and Support Rating are sensitive to a change in Fitch's assumptions around the probability of support that would be forthcoming from AUB and ultimately from PIfSS if required. If AUBUK is no longer considered a core subsidiary of AUB, this would likely cause a downgrade of its IDR. A rating action on AUB's IDRs would not necessarily be reflected in a corresponding change in AUBUK's ratings. KEY RATING DRIVERS - VR AUBUK's company profile constrains its VR, reflecting its limited franchise and relatively small size, particularly in view of its focus on the UK property market. The bank's long track record as a specialist property finance lender, with its residential mortgage loan portfolio mainly in prime central London, partly mitigate the risks. Its commercial property exposure is spread across the UK. The VR also reflects AUBUK's healthy capitalisation and experienced management team. AUBUK's asset quality is sound, although a large part of mortgage loans are granted on an interest-only basis. However, we believe the book is managed prudently. It is also exposed to an inherently volatile UK commercial real estate market, although the exposure represents 100% of equity. AUBUK's liquidity buffers are strong, but also a necessity given the highly concentrated deposit base. Nonetheless, Fitch expects the largest deposits to remain relatively stable. RATING SENSITIVITIES - VR The bank's VR is sensitive to significant price corrections in the UK property market. Conservative loan-to-value ratios reduce the risks, although in a scenario with deteriorating asset quality eroding capital through higher loan impairment charges, the VR could be downgraded. An upgrade of the VR is unlikely given the bank's company profile. AUBUK would need to significantly diversify its franchise, which is unlikely given the bank's focus and links to the Gulf region. Established in 1966 as the United Bank of Kuwait, AUBUK is one of the oldest Arab banks operating in the UK. The bank became a wholly owned subsidiary of AUB in July 2000. The business is split across three divisions: corporate banking and treasury, private banking and wealth management and residential property finance. However, its main activity is providing specialist mortgage finance to UK and Gulf clients. AUBUK formed about 13% of the group's total assets at end-2013. The rating actions are as follows: Long-term IDR affirmed at 'BBB+'; Outlook Stable Short-term IDR affirmed at 'F2' Support Rating affirmed at '2' Viability Rating affirmed at 'bbb-' Contact: Primary Analyst Mahin Dissanayake Director +44 20 3530 1618 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Andrew Parkinson Associate Director +44 20 3530 1420 Committee Chairperson Jens Hallen Senior Director +44 20 3530 1326 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: Additional information is available on Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 31 January 2014 is available at Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Ahli United Bank BSC here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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