'Fragile' Arab Bank on rating watch

Fitch Ratings says it has placed the long-term and short-term ratings of Arab Bank Australia Limited on "rating watch negative". Arab Bank Australia has a long-term rating of A- and a short-term rating of F1.

Fitch said the rating watch reflects the rating action taken on ABAL's parent, the Jordanian-based Arab Bank Plc.

Fitch went on to comment on the dynamics of ABAL's business, which, it said, had incurred a "sizeable loan impairment charge" and had reportedly "relatively moderate operating efficiency."

The ratings agency described the bank's business in Australia as "relatively fragile" and said that its revenues were "under pressure."

Fitch said that "ABAL conducted a strategic review in 2012, resulting in improvements in the bank's risk management framework. These changes should strengthen future asset quality."

"Impaired loans declined during 2012 but its impaired loan ratio is still weaker than that of regional peers."

In March this year, Moody's Investors Service withdrew its credit ratings on Arab Bank, including the Baa3 long-term rating and the Prime-3 short-term rating. Moody's said it had withdrawn the ratings for "business reasons".

In June 2012, Moody's downgraded the long-term debt rating of the bank to Baa3, from Baa2. Moody's also cut the bank's short-term rating to Prime-3, from Prime-2.

In May 2011, Moody's had cut the bank's rating by one notch.