Fitch Ratings commented on Wednesday October 15, 2003, that the decision by Arab Banking Corporation (ABC) to sell its entire 68 percent stake in Banco Atlantico, announced on October 9, would have no immediate bearing on ABC's ratings.
The following ratings are currently assigned to ABC: Long-term BBB-, Short-term F3, Individual C, Support 3, with a stable Outlook. However, any decision by ABC to re-invest the proceeds of the sale may result in rating actions, depending on Fitch's view of the merits or otherwise of such acquisitions, stated a press release.
ABC put its stake in Banco Atlantico up for sale earlier in the year, appointing Deutsche Bank to advise on the transaction. It has not yet announced who the prospective buyer will be. Banco Atlantico, a major Spanish retail bank, has been majority owned by ABC since the early 1980s. The decision to sell comes close on the heels of a similar decision to divest ABC's interest in the Hong Kong retail bank, International Bank of Asia (IBA).
ABC announced on September 8, that it had entered into an irrevocable undertaking to tender its 55 percent stake in IBA to the Taiwanese finance company, Fubon Financial Holding. The two sales are expected to be completed by the end of 2003 or early in 2004.
Banco Atlantico and IBA were not strategically aligned with the rest of ABC's operations and by divesting itself of them, ABC is underlining its commitment to re-focusing on its core Arab World markets. However, the two subsidiaries have been an important source of revenue to the ABC group, together contributing 66 percent of consolidated pre-provision profit in 2002.
Though the divestments will put ABC's already weak profitability under further pressure, Fitch does not consider this to be a threat to the ratings at the present time.
ABC will find it difficult to replace these income streams in the short-term, because there are few suitable acquisition opportunities in the Gulf or elsewhere in the Middle East. Though the region is considered to be over-banked, there is little current impetus towards consolidation. ABC has yet to announce the agreed price for either sale, though it is thought both will be in excess of book value. The proceeds will bolster the group's capital base and liquidity profile, which will allow it to develop further its existing Arab World operations, and particularly its domestic platforms in Jordan and North Africa.
Based in Bahrain, ABC is one of the largest banks in the Arab World. In addition to the wholesale banking operations centered in Bahrain, it has domestic banking platforms in Jordan, Egypt, Algeria and Tunisia, plus an international network encompassing London, New York, Paris, Frankfurt, Milan and Singapore.
ABC currently has no plans to sell its 82 percent stake in its third major subsidiary, Banco ABC Brasil, based in Sao Paolo, though a degree of asset downsizing is taking place in this entity. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
