Less letter of credit (L/C) business was a factor considered by Moody's Investors Service in its recent downgrade of the Commercial Bank of Kuwait (CBK).

The ratings agency has downgraded the bank's financial strength rating to D+ from C-and downgraded CBK's long-term global local currency and foreign currency deposit ratings to A2 from A1.

Lower volumes

Moody's notes that the bank is reporting lower business volumes, particularly down to less L/C business.

The bank has also seen narrowing interest margins exert pressure on operating income.

Poor asset quality

However, Moody's is most concerned about what it describes as the bank's asset quality problems.

While the bank's balance sheet structure is similar to other Kuwaiti banks, CBK's asset quality has experienced a sharper deterioration, suggesting that its loan-vetting and monitoring practices are in need of improvement the ratings agency said.

The bank is heavily exposed to a few major customers, Moody's added.

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