Second ratings downgrade likely for Arab Bank

Moody's on Friday placed the long term credit rating assigned to Arab Bank Australia, including the Baa2/P-2 long and short term credit ratings, on review for a possible downgrade.

Arab Bank Australia has A$200 million of February 2013 bonds on issue in the domestic market. The bonds are guaranteed by the Australian government.

On this occasion, the rationale for the downgrade is issues with the credit quality of the bank's business in Australia, rather than any wider issues relating to the business and funding of its Jordanian-based owner.

Moody's said the review for downgrade is a result of asset quality pressures relating to the impairment of a number of single, large commercial loan exposures in 2010. These exposures have yet to be resolved.

Arab Bank Australia is still to release its profit for 2011. It recorded a loss in 2009 and made a small profit in 2010.

Its December 2011 APS 330 report puts its level of impaired assets at A$29 million, equal to 17 per cent of its capital base.