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National Bank of Bahrain − Outlook Revised Following Sovereign Rating Action
(MENAFN- Capital Intelligence Ltd) Capital Intelligence Ratings (CI Ratings or CI) today announced that it has revised the Outlook for the Long-Term Foreign Currency Rating (LT FCR) and Bank Standalone Rating (BSR) of the National Bank of Bahrain’s (NBB or the Bank) to Negative from Stable, following a similar rating action on the Bahrain sovereign earlier this month (‘B+’/‘B’/Negative). At the same time, CI Ratings has affirmed NBB’s LT FCR and BSR at B+’ and ‘b+’, respectively.
The Bank’s FCR and BSR remain correlated with the sovereign’s creditworthiness. Therefore, any deterioration (or improvement) in Bahrain’s ratings would have a corresponding effect on NBB’s ratings. The BSR is derived from a Core Financial Strength (CFS) rating of ‘bbb-’ (affirmed) and the constraints imposed by Bahrain’s Operating Environment Risk Anchor (OPERA) of ‘b+’. Our Extraordinary Support Level (ESL) assessment of Moderate does not result in any uplift for the Bank’s LT FCR because the BSR is already at the sovereign level. Although we deem the government’s willingness to provide support to be high given NBB’s status as the sole majority government-owned bank in the country, its financial capacity may be limited, as indicated by Bahrain’s sovereign ratings.
The revision of Bahrain’s sovereign outlook reflects weakening public finances, including very high central government debt as well as increasing liquidity risks. The latter is due to the central government’s large gross financing needs and dependence on cross-border funding, rendering the sovereign’s access to the capital markets vulnerable to shifts in investor risk perception. The outlook revision also takes into consideration Bahrain’s external vulnerabilities, which are exacerbated by the modest and declining coverage ratio of foreign exchange reserves to short-term external debt on a remaining maturity basis.
In turn, NBB’s high exposure to the sovereign through investment in government securities – and, to a lesser extent, lending − links the Bank’s creditworthiness to that of the sovereign. Government bond exposure was equivalent to 203% of total equity at end-2024. In our view, a significant sovereign credit event could potentially transmit stress to the Bank’s balance sheet including capital, as well as earnings. This is an important constraint for the ratings.
The CFS remains underpinned by NBB’s well-regarded management and established business franchises (conventional and Islamic banking – the latter through local subsidiary Bahrain Islamic Bank), majority government ownership, good liquidity and customer deposit funding, and sound profitability. Also supporting the CFS is the prudent leverage and high-quality capital base. The major factors constraining the CFS are the challenging operating and geopolitical environment (including potential global economic headwinds), and significant concentrations in Bahrain government securities, borrowers and customer deposits. While the planned merger with rival Bank of Bahrain and Kuwait will significantly expand market share, it is not expected to materially alter NBB’s overall risk profile.
The OPERA is at a level indicative of high risk and takes into account Bahrain’s limited fiscal flexibility, relative dependence on hydrocarbon revenues and small economy. Industry risk is also deemed high given the large size of the banking sector relative to GDP. Bahrain currently has limited capacity to absorb economic and financial sector shocks, although the risks associated with high gross public financing needs are partially mitigated by demonstrated financial support from other GCC states (notably the Kingdom of Saudi Arabia).
Rating Dynamics: Upside/Downside Scenarios
The most likely upside scenario for the next 12 months would be a revision of the Outlook to Stable. This would need to be preceded by a similar rating action on the sovereign, all other factors remaining unchanged.
While not our base case, the Bank’s LT FCR and BSR could be lowered by more than one notch if this was preceded by a similar rating action taken on the sovereign’s ratings.
Contact
Primary Analyst: Morris Helal, Senior Credit Analyst; E-mail: ...
Committee Chairperson: Rory Keelan, Senior Credit Analyst
About the Ratings
The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.
The following information sources were used to prepare the credit ratings: public information and information provided by the rated entity. Financial data and metrics have been derived by CI from the rated entity’s audited financial statements for FY2020-24. CI may also have relied upon non-public financial information provided by the rated entity and may also have used financial information from credible, independent third-party data providers. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process.
The principal methodology used to determine the ratings is the Bank Rating Methodology, dated 3 April 2019 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at
This rating action follows an ad hoc review of the rated entity. Ratings on the entity were first released in June 1986. The ratings were last updated in June 2024. The ratings and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure. The ratings have been assigned or maintained at the request of the rated entity or a related third party.
Conditions of Use and General Limitations
The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.
Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.
Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.
The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.
Copyright © Capital Intelligence Ratings Ltd 2025
The Bank’s FCR and BSR remain correlated with the sovereign’s creditworthiness. Therefore, any deterioration (or improvement) in Bahrain’s ratings would have a corresponding effect on NBB’s ratings. The BSR is derived from a Core Financial Strength (CFS) rating of ‘bbb-’ (affirmed) and the constraints imposed by Bahrain’s Operating Environment Risk Anchor (OPERA) of ‘b+’. Our Extraordinary Support Level (ESL) assessment of Moderate does not result in any uplift for the Bank’s LT FCR because the BSR is already at the sovereign level. Although we deem the government’s willingness to provide support to be high given NBB’s status as the sole majority government-owned bank in the country, its financial capacity may be limited, as indicated by Bahrain’s sovereign ratings.
The revision of Bahrain’s sovereign outlook reflects weakening public finances, including very high central government debt as well as increasing liquidity risks. The latter is due to the central government’s large gross financing needs and dependence on cross-border funding, rendering the sovereign’s access to the capital markets vulnerable to shifts in investor risk perception. The outlook revision also takes into consideration Bahrain’s external vulnerabilities, which are exacerbated by the modest and declining coverage ratio of foreign exchange reserves to short-term external debt on a remaining maturity basis.
In turn, NBB’s high exposure to the sovereign through investment in government securities – and, to a lesser extent, lending − links the Bank’s creditworthiness to that of the sovereign. Government bond exposure was equivalent to 203% of total equity at end-2024. In our view, a significant sovereign credit event could potentially transmit stress to the Bank’s balance sheet including capital, as well as earnings. This is an important constraint for the ratings.
The CFS remains underpinned by NBB’s well-regarded management and established business franchises (conventional and Islamic banking – the latter through local subsidiary Bahrain Islamic Bank), majority government ownership, good liquidity and customer deposit funding, and sound profitability. Also supporting the CFS is the prudent leverage and high-quality capital base. The major factors constraining the CFS are the challenging operating and geopolitical environment (including potential global economic headwinds), and significant concentrations in Bahrain government securities, borrowers and customer deposits. While the planned merger with rival Bank of Bahrain and Kuwait will significantly expand market share, it is not expected to materially alter NBB’s overall risk profile.
The OPERA is at a level indicative of high risk and takes into account Bahrain’s limited fiscal flexibility, relative dependence on hydrocarbon revenues and small economy. Industry risk is also deemed high given the large size of the banking sector relative to GDP. Bahrain currently has limited capacity to absorb economic and financial sector shocks, although the risks associated with high gross public financing needs are partially mitigated by demonstrated financial support from other GCC states (notably the Kingdom of Saudi Arabia).
Rating Dynamics: Upside/Downside Scenarios
The most likely upside scenario for the next 12 months would be a revision of the Outlook to Stable. This would need to be preceded by a similar rating action on the sovereign, all other factors remaining unchanged.
While not our base case, the Bank’s LT FCR and BSR could be lowered by more than one notch if this was preceded by a similar rating action taken on the sovereign’s ratings.
Contact
Primary Analyst: Morris Helal, Senior Credit Analyst; E-mail: ...
Committee Chairperson: Rory Keelan, Senior Credit Analyst
About the Ratings
The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.
The following information sources were used to prepare the credit ratings: public information and information provided by the rated entity. Financial data and metrics have been derived by CI from the rated entity’s audited financial statements for FY2020-24. CI may also have relied upon non-public financial information provided by the rated entity and may also have used financial information from credible, independent third-party data providers. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process.
The principal methodology used to determine the ratings is the Bank Rating Methodology, dated 3 April 2019 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at
This rating action follows an ad hoc review of the rated entity. Ratings on the entity were first released in June 1986. The ratings were last updated in June 2024. The ratings and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure. The ratings have been assigned or maintained at the request of the rated entity or a related third party.
Conditions of Use and General Limitations
The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.
Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.
Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.
The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.
Copyright © Capital Intelligence Ratings Ltd 2025
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