Burgan Bank – Issuer and Issue Ratings Affirmed

(MENAFN- Capital Intelligence Ltd) 27 March 2026

Rating Action

Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed the Long-Term Foreign Currency Rating (LT FCR) and Short-Term Foreign Currency Rating (ST FCR) of Burgan Bank
K.P.S.C. (BB or the Bank) at ‘A+’ and ‘A1’, respectively. At the same time, CI Ratings has affirmed BB’s Standalone Rating (BSR) of ‘bbb+’, Core Financial Strength (CFS) rating of ‘bbb+’ and Extraordinary Support Level (ESL) of High. The Outlook for the LT FCR and BSR is Stable.

CI has also affirmed the issue ratings assigned to the Bank’s Perpetual Additional Tier 1 Bonds at ‘BBB-’ with a Stable Outlook.

Rating Drivers

As the ESL is set at High, there is a three-notch uplift for the LT FCR over the BSR, taking it to ‘A+’. The ESL reflects CI’s view that official support for BB would be forthcoming if needed. As the sovereign is itself rated ‘A+’ by CI, financial capacity to support is not in doubt. Despite the lack of government ownership, willingness to support is also considered to be strong given BB’s systemic importance (D-SIB) within Kuwait, the continuing blanket guarantee by the Kuwaiti government of customer deposits placed domestically, and the government’s track record in dealing with other banks in financial distress.

The Bank’s BSR is derived from a CFS rating of ‘bbb+’ and an Operating Environment Risk Anchor (OPERA) of ‘bbb’, with the latter indicative of a level of modest risk. The OPERA reflects the substantial financial buffer of the sovereign and its capacity to support the banking system in case of imbalances. It also reflects the economy’s limited diversification, including high reliance on hydrocarbon exports, and slow – albeit improving – reform progress. In 2025, Kuwait approved a long-awaited borrowing law aimed at addressing fiscal pressures and financing domestic infrastructure projects. The law allows the government to issue up to around 60% of GDP in local or foreign currency debt instruments with long-term maturities. This will strengthen Kuwait’s fiscal flexibility and support long-term growth. Kuwait returned to the international capital markets in October 2025 – the first time since 2017.

BB has a moderate asset base in volatile operating environments, including Türkiye (13% of assets). The latter has high external liquidity risks due to low external reserve buffers, and elevated financial stability risks, although Türkiye’s operating environment and economy have improved over the past year. In 2023, BB sold a 52.0% stake (it previously owned 99.7%) in BB Turkiye (BBT) to Al Rawabi United Holdings, a company owned by KIPCO. BB maintains operational control, and BBT therefore continues to be consolidated in BB’s accounts. The transaction was part of BB’s asset reallocation strategy, whereby the Bank aims to optimise its exposure to subsidiaries and focus mainly on its core market, Kuwait. The transaction helped BB reduce its exposure to the Turkish market directly. BB’s ownership is now 47.55%.

The ongoing armed conflict in the Arabian Gulf has caused a sharp deterioration in the operating environment in most GCC – including Kuwait – and Middle Eastern markets; the severity and duration of this deterioration is still uncertain. However, CI’s baseline scenario assumes that this escalation will be short-lived, with contained damage on hydrocarbon assets in the region and temporary closure of the Strait of Hormuz. In this context, Kuwaiti banks’ credit profiles remain anchored by the availability of sovereign backing capacity as well as track record of sovereign backing in the event of need, supported by the large foreign assets in the Kuwait Investment Authority. Although renewed regional tensions will dampen investment activity and elevate precautionary liquidity demand, high capital ratios and a stable deposit base mitigate short-term rating pressure at present. However, it is likely that there will be pressure on asset quality and profitability.

In line with the KIPCO Group’s strategy of asset diversification, enhancing competitiveness and building new income streams, BB acquired a 100% stake in United Gulf Bank (UGB) in 2025, a conventional wholesale bank (with an Islamic window) licensed and headquartered in Bahrain and previously owned by United Gulf Holding (UGH). Both UGB and UGH are KIPCO-related entities. This transaction was in line with the Bank’s strategy to focus on stable and less fluctuating markets, particularly Kuwait and the wider GCC region. The acquisition provides BB with an opportunity to tap into key high-growth sectors of Islamic financing and investments while creating cross-selling opportunities, in addition to various integrational synergies. The transaction will strengthen BB’s offerings to its clients, providing them with access to the Kamco Investment platform (UGB owns 60% of Kamco – USD16bn AUM).

The Bank’s BSR and CFS rating are supported by good asset quality overall, solid credit loss absorption capacity, a sound funding profile with over two-thirds of assets funded by customer deposits and supported by diversified wholesale funding, and satisfactory capital adequacy. Non-financial supporting factors are BB’s good business model and franchise, particularly in Kuwait, and – as the second-largest conventional bank in Kuwait – an expected high level of support from the government if needed.

The business strategy emphasises cautious growth, but with strategic priorities – including transforming its retail banking business. BB’s main focus is Kuwait. The proportion of Kuwait-based assets (before consolidated adjustments) was 72% of the balance sheet at end-2025. As well as Türkiye and Bahrain, BB has subsidiaries in Algeria (11% of assets) and Tunisia (2%). Asset growth in Kuwait going forward is expected to accelerate, particularly on the back of the imminent new mortgage lending law together with the country’s effort to raise infrastructure investment.

BB’s main credit challenges relate to the overseas subsidiaries, particularly in Türkiye, where markets are subject to elevated levels of political and economic risk. BBT’s performance was satisfactory in 2025 but contributed a small loss at the consolidated level due to inflationary accounting. BBT has focused on growing its local currency loans cautiously and has also invested in bonds with floating yields. Its loan asset quality is good, with a low level of NPLs. The Algerian bank, which focuses on trade finance, remains a satisfactory performer, as does Tunisia.

Other challenges at the parent bank level include concentrations in both borrowers and deposits, and high exposure to the real estate and construction sectors – although these are all common features of the Kuwaiti banking sector. Some increased diversification has, however, been seen over the past two years, and management expects further progress going forward. Related party exposure is high against total equity, and related party loans form 17% of gross loans – down from one-quarter two years ago. Profitability in terms of both ROAA and operating profit on average assets is also modest, and both metrics declined in 2025 due to increased operating expenses and, in particular, a higher cost of risk. Regional geopolitical risk also remains a challenge.

Net interest income (NII) recorded a good rise in 2025, driven by credit growth and stable margins across the group. Retail operations were particularly solid; for many years, BB’s retail franchise in Kuwait had been underexploited according to management. However, as part of the Bank’s revenue diversification plan, it is focused on rescaling the retail operation, and the outlook appears promising. Margins may, however, tighten slightly this year as policy rates fall, particularly in Türkiye. The cost base remains high across the group, with the cost-to-income ratio elevated, although in part reflected in group revenue.

Loan asset quality is good, although NPLs rose in 2025; this was connected to real estate loans in Kuwait. Maintaining credit quality is a challenge in Türkiye and Algeria, although both operations currently have low NPLs. Stage 2 loans (8.8% of gross loans) declined in 2025. Credit loss absorption capacity is considered good, reflecting the strong loan-loss reserve (LLR) coverage, which is mainly composed of general reserves. Satisfactory capital ratios also mean that the extended NPL coverage ratio is very robust. The quality of BB’s securities portfolio is satisfactory.

Liquidity metrics are sound, and the funding profile is comfortable. Customer deposits fund 69% of total assets. BB is an active user of the capital markets, raising Tier 2 subordinated debt and medium-term borrowings, with the latter through its EMTN programme, including a new five-year issue in 2025. BB also issued certificates of deposit in 2025. The liquidity coverage ratio and net stable funding ratio are both comfortably above regulatory requirements, and the loans to customer deposits ratio is low relative to peer banks. There, however, remains a degree of concentration in the deposit base. As with other Kuwaiti banks, this reflects large (and very stable) balances from government sector entities in Kuwait. It has been the experience of CI that such government balances are stable across all banks in Kuwait. CI views liquidity and refinancing risks at BB as generally being low.

BB has a satisfactory capital position, with a solid CET1 component and sound overall CAR, although all capital ratios were lower in 2025 due to the increase in risk-weighted assets and the acquisition of UGB.

Issue Ratings

The issue rating on the AT1 bond is set two notches below the Bank’s BSR of ‘bbb+’. We typically use a Bank’s BSR as the starting point for rating hybrid securities. This is because we consider it more likely that extraordinary support, which is factored into foreign currency issuer ratings, will be made available for senior financial obligations than for subordinated obligations. Consequently, from BB’s BSR of ‘bbb+’, CI deducts one notch for contractual subordination (it is senior only to junior obligations, including ordinary shares) and one notch for coupon risk, since the terms of the instrument allow the Bank to cancel interest payments on a non-cumulative basis, without triggering an event of default. We have not deducted an additional notch for the risk of the bond principal being written down permanently, while the Bank is still a going concern as, in our view, the instrument is only likely to take losses when the Bank is no longer viable and at approximately the same time as other hybrid and subordinated securities.

We currently think it is unlikely that principal losses would be imposed outside of a resolution scenario, before the Bank has reached the point of non-viability (PONV), given the authorities’ highly supportive approach towards the banking sector, the absence of a formal bank resolution framework and bail-in rules, and the country’s relatively untested insolvency regime. In addition, the contractual clauses for triggering a write down are qualitative PONV conditions that are common to AT1 and Tier 2 instruments under Basel III. There are no hard (quantitative) triggers, such as a specific capital ratio.

The PONV is decided by the regulator, the Central Bank of Kuwait (CBK), and is subject to its discretion. Under the terms of the instruments, the principal of the AT1s would be written down if BB were instructed to do so by the CBK on the grounds of non-viability, or if an immediate injection of capital were required, by way of an emergency intervention, without which the Bank would become non-viable (as determined by the CBK). The occurrence of a write-down would be treated as a default under CI’s rating definitions and criteria.

CI acknowledges that it is possible that the authorities could provide pre-emptive extraordinary support to the Bank, if needed, well ahead of a non-viability assessment, and therefore that sovereign support could flow through to hybrid securities. However, in the absence of any precedents, we do not assume that holders of hybrid securities and other subordinated instruments would always receive the same level of protection as senior creditors and depositors when a bank is close to failing. Consequently, we use the Bank’s BSR rather than the LT FCR as the reference point for determining the instrument’s rating.

Rating Outlook

The LT FCR and BSR Outlook remains Stable. CI does not currently expect any of the external or internal credit challenges to result in any changes to the ratings over the next 12 months.

The Stable Outlook indicates that the issue rating is likely to remain unchanged over the next 12 months, in line with the same expectation for the Bank’s BSR, which is the starting point for the AT1 bond rating. BB has good buffers in place, which support the Stable Outlook.

Rating Dynamics: Upside Scenario

As financial metrics are sound and the resulting ratings are already at a high level, improvement is not seen as being likely over the next year. However, if capital ratios, liquidity and profitability metrics improved significantly, then there could be upside pressure, provided other metrics were maintained.
Rating Dynamics: Downside Scenario

Assuming there is no change in either OPERA or ESL notching, a one-notch reduction in the LT FCR to ‘A’ would require a one-notch reduction in the BSR to ‘bbb’. Given current financial metrics, such a reduction does not currently appear to be likely within the next 12-month timeframe. If the operating environment was to deteriorate more than our current baseline scenario vis-à-vis the current hostilities in the region, the OPERA and also the sovereign might come under pressure; should it be reduced, the ratings would be likely to fall. Separately, should the Bank’s financial profile weaken, particularly in terms of asset quality, liquidity or capital, the ratings may fall.

Downward pressure on the issue rating or outlook would follow similar pressure on the Bank’s BSR. The issue rating is also sensitive to CI’s assumptions regarding the level of coupon risk and the timing and scope of regulatory intervention and could be adversely affected by the adoption of a more definitive bank recovery and resolution regime in Kuwait.

Contact

Primary Analyst: Darren Stubing, Senior Credit Analyst; E-mail: ...
Secondary Analyst: Rory Keelan, Senior Credit Analyst
Committee Chairperson: Morris Helal, Senior Credit Analyst

About the Ratings

The information sources used to prepare the credit ratings are as follows: public information and information provided by the rated entity. Financial data and metrics have been derived by CI from the rated entity’s financial statements for FY2021-25. 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 methodologies used to determine the ratings are the Bank Rating Methodology (dated 3 April 2019) and the Bond Rating Methodology. For the methodology and our definition of default see Information on rating scales and definitions and the time horizon of rating outlooks 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 a scheduled periodic (annual) review of the rated entity. Ratings on the issuer were first released in November 1992 and last updated in April 2025. Ratings on the issue were first released in April 2024 and last updated in April 2025. 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. Further information on the attributes and limitations of ratings can be found in the applicable methodology or else at

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 2026

MENAFN29032026002960000411ID1110914328