Moody's Investors Service has followed up its decision earlier this year to downgrade Arab Bank Plc with a downgrade of the bank's Australian subsidiary. Moody's announced yesterday that it had knocked Arab Bank Australia down to Baa2. Moody's said in a statement: "While the potential for support from the parent remains very high, the ability of the parent to provide that support has weakened."Arab Bank Plc was downgraded from A3 to Baa1 with a negative outlook. Moody's said: "The change was mainly driven by the parent's sizeable regional exposures to countries in the Middle East and North Africa, which are facing increased political and economic risks following the recent political turmoil."There is no impact on the Aaa rating of debt securities the local bank issued under the Government's guarantee scheme.Arab Bank Australia has had patchy results over the past couple of years. It reported a loss of A$405,000 in 2009, after loan impairment charges jumped from $894,000 in 2008 to $12.7 million. It made a provision for 100 per cent of a debt to the International Banking Corporation, a Bahraini bank.The bank had loans and advances of $887 million at the end of 2009.Last year it returned to profit, helped by a significant increase in operating income and a reduction in the loan impairment charge. Net profit for 2010 was $5.7 million.At the end of last year the bank had a $143 million residential mortgage portfolio (up from 131 million in 2009), a $757 million commercial loan book ($706 million in 2009) and $63 million of overdrafts (up from $47 million).The bank's traditional strength has been in deposits. At the end of 2010 it had $344 million in at-call deposits ($282 million in 2009) and $352 million in term deposits ($395 million in 2009).Other funding comes from $200 million of term notes, issued in February 2010 with a three-year maturity.