ABC says it is not at risk from Libya freeze
As investors try to assess which companies are likely to be penalised by recent international sanctions against Libya, Arab Banking Corporation (ABC) in Bahrain says it is not among them.
But the bank could still be indirectly affected, analysts indicated.
"Arab Banking Corporation confirms that neither ABC nor any of its subsidiaries are subject to the asset freezes specified in the US executive order or UN Resolution 1970 and that all members of the ABC Group are able to transact freely in the United States and elsewhere," the bank said on its website.
Shares of ABC, listed on the Bahrain stock exchange, rose almost 4 per cent to 0.52 dinars yesterday.
The company is 59.3 per cent owned by the Central Bank of Libya. The Abu Dhabi Investment Authority once held a 17.7 per cent stake in ABC but sold it to the Libyan central bank in December.
On Friday, Barack Obama, the US president, signed an executive order blocking property and banking transactions related to Libyan state assets, the Libyan leader, Muammar Qaddafi, and his close associates. The UN Security Council also passed a resolution calling on UN member states to impose asset freezes on various Libyan individuals. Despite not being subject to asset freezes, ABC is still likely to face challenges because of its exposure to Libya.
Moody's Investors Service downgraded ABC two notches, citing "the pressures that the bank is likely to face, given its association with its majority shareholder".
"ABC maintains some credit exposure to Libya, primarily off-balance sheet, and also exhibits considerable funding reliance on Libyan institutions," Moody's said. The ratings agency acknowledged the uncertainty surrounding potential developments in Libya and said it would monitor them and assess the extent to which ABC might be affected.
Fitch Ratings and Standard & Poor's also cut their ratings of the lender.
ABC acquired a 49 per cent stake in Mediterranean Bank, a Libyan lender, two months ago for US$60 million. The transaction, which is subject to regulatory approval by the Central Bank of Libya, was expected to be finalised by the end of this month. But it is not clear whether the deal will go through.