Fitch Ratings has revised the Outlooks on Arab Tunisian Bank’s (ATB) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to Stable from Negative and affirmed the IDRs at ‘B-‘.
Fitch has also upgraded the Viability Rating (VR) to ‘ccc+’ from ‘ccc’. The bank’s National Long-Term Rating has been affirmed at ‘AA+(tun)’ with a Stable Outlook.
The revision of the Outlook reflects Fitch Ratings’ view that the risk of Tunisian authorities intervening in the local banking system is moderate rather than high, despite the government’s large external financing risk.
This view considers a moderate proportion of foreign-currency liabilities in the Tunisian banking sector (less than 15% at end-November 2022), while Tunisia’s external debt arises predominantly from the sovereign and quasi sovereign entities.
ATB’s ‘B-‘ IDRs are above the sovereign’s ‘CCC+’ IDRs but its Long-Term Foreign-Currency IDR is capped by Tunisia’s ‘B-‘ Country Ceiling. This reflects transfer and convertibility risks, which would constrain ATB’s ability to use external support to service its foreign-currency debt.
Fitch explains that ATB’s IDRs and National Ratings are driven by potential support from the bank’s 64.2% shareholder, Jordan-based Arab Bank Plc (AB, BB/Stable). ATB’s National Ratings are the highest ratings among Fitch-rated Tunisian issuers.
It added that its view of shareholder support is based on ATB’s majority ownership by AB and its role in the group, as the subsidiary operates in a strategic market for AB. Despite being a large overseas subsidiary, ATB contributes a limited 4% to the group’s assets, making any required support manageable for the parent.
However, Fitch Ratings considers that ATB’s capital buffers are weak relative to the bank’s risk profile. The Tier 1 ratio was 8.6% at end-2022 (end-2021: 7.9%), providing a limited buffer over the regulatory minimum of 7%.
“Positively, AB provides regular ordinary capital support to ATB and we expect it will subscribe to any rights issue initiated by ATB,” Fitch pointed out.
