Commercial Bank of Kuwait – Initial Rating Assigned to KWD100mn Tier 2 Subordinated Bond

18 September 2023

Capital Intelligence Ratings (CI Ratings or CI) has assigned a first-time issue rating of ‘BBB’ to the KWD100mn Basel III-compliant Tier 2 subordinated unsecured bond issued by Commercial Bank of Kuwait (ComBK). The Outlook for the rating is Stable.

The issue rating is derived from: (i) ComBK’s Bank Standalone Rating (BSR); (ii) the bond’s contractual subordination to senior unsecured obligations; and (iii) CI’s view that the bond’s loss absorption mechanism is unlikely to be triggered before the Bank becomes non-viable on a standalone basis. CI’s issue ratings for bank hybrid securities and subordinated debt instruments (especially those with contingent capital features) capture impairment risk (which includes the likelihood of losses due to the activation of any loss absorbing mechanisms) and repayment priority. CI typically uses a bank’s BSR as the starting point for such securities. This is because it is considered more likely that…