Moody's downgrades Bahrain's banking system

The outlook for Bahrain's banking system is negative and credit conditions will remain tough, but lenders probably don't have to raise new capital, ratings agency Moody's Investor Services said on Monday.

Banks in Bahrain have seen profits decline as they take provision against a rise in loan defaults, with private Saudi groups Saad and Ahmad Hamad Al-Gosaibi and Bros Co (AHAB) the most prominent companies to undergo debt restructuring.

Moody's negative outlook comes one month after the Bahrain central bank seized two banks belonging to Saad and Al-Gosaibi in a bid to manage the fallout of the financial trouble at the two Saudi firms.