S&P Rates Al Baraka Group BBB-, Negative Outlook

In a report issued today, Standard & Poor’s (S&P) assigned a BBB- rating to Al Baraka Banking Group B.S.C., with a Negative Outlook.

S&P also indicated that the negative outlook on Al Baraka reflects the deterioration in the operating environment of some countries where the group operates, and holds high exposure to the sovereign, such as in Egypt, as well as the pressure on the bank’s capitalization due to its solid growth.

This means that the group’s modest earnings capacity may not be sufficient to sustain a risk-adjusted capital (RAC) ratio before adjustments above 5.0% over time, especially if further deterioration in S&P’s sovereign ratings or economic risk scores take place in ABG’s key markets, the report issuer added.

“We could revise the outlook to stable if we conclude that the group demonstrates strong resilience in asset quality and if we become confident that it is able to maintain an estimated RAC ratio before adjustments above 5.0% on a sustainable basis. A major improvement in the credit conditions of the group’s operating environment–albeit a remote scenario–could also trigger an outlook revision,” S&P stated

Mubasher