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Fitch revises outlook on 3 Jordanian banks to stable

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Fitch revises outlook on 3 Jordanian banks to stable

Fitch Ratings on Feb. 28 took actions on Jordanian lenders Arab Bank Plc, Jordan Islamic Bank and Bank of Jordan Plc.

The agency downgraded Arab Bank's long-term issuer default rating to BB from BB+ and revised the outlook to stable from negative. Its viability rating was also lowered to "bb" from "bb+".

The downgrades reflect the bank's high lending growth in Jordan, which stood at 23% in 2017 — well above the sector average of about 8%. Arab Bank's increased exposure to Jordan's economic environment adds to its already high exposure to the Jordanian sovereign relative to its equity via holdings of government securities, which Fitch said offsets the benefits of the lender's geographical diversification to some extent.

Arab Bank's short-term issuer default rating was affirmed at B, while its support rating and support rating floor were affirmed at 5 and No Floor, respectively.

Meanwhile, Fitch revised the outlooks on Jordan Islamic Bank and Bank of Jordan to stable from negative and affirmed the banks' long-term issuer default ratings at BB-. The agency also affirmed both banks' short-term issuer default ratings at B, their viability ratings at "bb-", and their support ratings and support rating floors at 4 and B+, respectively.

The outlook revisions reflect the stabilization of Jordan's operating environment, while the affirmations reflect limited changes to the banks' credit profiles since the agency's last review.

Fitch noted, however, that the operating environment in Jordan continues to be challenging because of slow growth and the government's rising debt trajectory, as well as the significant influx of Syrian refugees, which the agency said puts pressure on the country's resources.