Capital Intelligence Downgrades Bahrain International Bank

VOL. XLV

No 27

8-July-2002

BAHRAIN

Capital Intelligence Downgrades Bahrain International Bank

Rating agency Capital Intelligence (CI) announced on 3 July that it had downgraded the long- and short-term foreign currency ratings of Bahrain International Bank (BIB) to BB and B respectively. CI notes that BIB, whose major activity is direct corporate investment and real estate development opportunities in the US and Europe, recorded a large loss of $47mn in 2001 due to the effects of the downturn in global markets, reduced investment banking activities and accounting changes. A substantially higher provision charge was made, primarily to cover the bank’s US exposure, and results highlighted BIB’s vulnerability to earnings fluctuations due to the fact that it relies on the realization of longer-term illiquid investments.

BIB has embarked on a strategy of reducing the scale of its private equity holdings and achieved a net profit of $2.2mn in the first quarter of this year, aided by significant gains on the sale of corporate and government securities. The bank recently sold a strategic stake in Coast Development and Investment Company, a quoted Kuwaiti investment entity, and divested a small investment in Capital Recovery Services, a US-based debt recovery services company. The profit on the $3mn sale should have a positive impact on BIB’s second quarter earnings. The bank is closely managing expenses and realizing additional securities sales in order to steadily reduce leverage and restore profitability, although CI notes that market conditions remain very challenging.