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Bahraini Banks’ Outlook Negative: Moody’s

DUBAI — The outlook for Bahrain’s banking system is negative and credit conditions will remain tough, but lenders probably don’t have to raise new capital, ratings agency Moody’s Investor Services said on Monday.

Banks in Bahrain have seen profits decline as they take provision against a rise in loan defaults, with private Saudi groups Saad and Ahmad Hamad Algosaibi & Bros, the most prominent companies to undergo debt restructuring. Moody’s negative outlook comes one month after the Bahrain central bank seized two banks belonging to Saad and Algosaibi in a bid to manage the fallout of the financial trouble at the two Saudi firms. “Difficult credit and business conditions will continue over the next few months,” said George Chrysaphinis, a Moody’s analyst.

Moody’s negative outlook is based on the economic slowdown in the Gulf Cooperation Countries, which is expected to exert pressure on asset prices and business volumes. Moody’s also cited the more challenging wholesale funding conditions in the GCC and “the anticipated deterioration in at least 
some aspects of Bahraini banks’ franchises and risk profiles” as reasons for the negative outlook.

Despite the challenging credit conditions Bahraini banks face, they are able to absorb credit losses and unlikely need to raise capital, Moody’s said.