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Moody's revises outlooks on Qatari, Kuwaiti, UAE banks following sovereign moves

Moody's revised to stable from negative the outlooks on various ratings of seven banks in the Gulf Cooperation Council region on May 30 following actions on their home countries' sovereign ratings.

The actions follow the recent downgrade of Qatar and affirmations of Kuwait and the United Arab Emirates, with all three countries' outlooks revised to stable from negative.

The agency revised to stable from negative the outlooks on the Aa3 long-term deposit ratings of Qatar National Bank QPSC, National Bank of Kuwait SAKP and First Abu Dhabi Bank PJSC and the A1 long-term deposit ratings of Kuwait Finance House KSCP, Abu Dhabi Commercial Bank PJSC and Union National Bank - PJSC. Also revised from stable to negative were the outlooks on the A2 long-term issuer ratings of Abu Dhabi Islamic Bank PJSC, the Aa3 senior unsecured foreign-currency regular bond/debenture ratings of First Abu Dhabi Bank and the A1 foreign-currency senior unsecured rating of Union National Bank.

The long-term deposit ratings of Qatar National Bank, National Bank of Kuwait and First Abu Dhabi Bank were affirmed at Aa3, while those of Kuwait Finance House, Abu Dhabi Commercial Bank and Al Hilal Bank were affirmed at A1 and that of Abu Dhabi Islamic Bank at A2.

The agency affirmed Al Hilal Bank PJSC's A1 long-term issuer ratings and maintained the outlook at negative, while also affirming its "ba2" baseline and adjusted baseline credit assessments. The negative outlook reflects Moody's view that a deteriorating trend in the lender's financial fundamentals, including asset quality, will continue.

The agency said the outlook revisions on the Kuwaiti lenders directly reflect that on the sovereign, while Qatar National Bank's deposit rating was affirmed despite the sovereign downgrade because Moody's continues to incorporate a very high likelihood of government support into its evaluation of the bank. As such, the long-term deposit rating continues to benefit from a four-notch uplift from Qatar National Bank's baseline credit assessment of "baa1".

Moody's did lower Qatar National Bank's long-term counterparty risk assessment to Aa3(cr) from Aa2(cr), noting that the assessment is constrained by Qatar's local-currency deposit ceiling, which had been lowered to Aa3. The bank's short-term counterparty risk assessment was affirmed at Prime-1(cr), while its "baa1" baseline and adjusted baseline credit assessments were unaffected.

For the four Emirati lenders with stable outlooks, these reflect the outlook change on the sovereign.