The Rating upgrade improves the Image and is an affirmation of the Bankës inherent strength.

This will also improve the Bankís access to the International Capital markets.

Executive Summary

Moody Investor Services conducted a review of Gulf Bank KSCP and have upgraded Gulf Bank's long-term deposit rating upgraded to 'A3' from 'Baa1';Baseline Credit assessment (BCA) and adjusted BCA upgraded to 'ba1' from 'ba2';Short-term deposit rating affirmed as Prime-2 and the Counterparty Risk Assessment revised up to A2 (cr)/ Prime-1 (cr). Moody's has revised the outlook on long-term ratings to stable from positive.

According to Moodys, the Rating action was driven by (1) Continuing improvements in asset quality and provisioning coverage; (2) the strengthening of the bank's risk management practices and a further reduction of balance sheet risk, which the agency expects will contain the risk of a resurgence in NPL formation; and (3) The rating agency's expectation that core profitability will remain resilient and capitalization buffers will remain adequate driven by a conservative implementation of Basel III capital requirements by Kuwait's central bank.(4) Very high probability of government support in case of need

Moodys stated that the main driver of Gulf bank's upgrade is the considerable improvement in the bank's asset quality and provisioning coverage metrics, which Moody's expects will improve further in the coming quarters.

Moody's also expects asset quality to improve further and the Bank's NPL ratio to reach 2% by 2016.

Also driving the action, the rating agency expects new NPL formation to remain at low levels due to improvements in the bank's risk management practices, and tightened underwriting standards and the continuing reduction in credit concentrations and exposure to high-risk segments

According to Moody's the rating action was further supported by the fact that the Bank's core profitability has proved resilient and remains the first line of defense against unforeseen losses.

The agency mentioned that the Bank's capital buffers are also expected to remain adequate, with a Basel III common equity Tier 1(CET1) ratio of 14.3% at year-end 2014. The Bank already meets the Central Bank of Kuwait's conservative Basel III implementation under which the bank should hold a minimum CET1 of 10.5%,total Tier 1 of 12% and total capital of 14% to risk-weighted assets by end-2016 (inclusive of a 2.5%capital conservation buffer and a 1% domestic systemically important bank buffer specific to the Bank).

Moody's continues to believe there is a very high likelihood of government support for Gulf Bank's rated deposits in case of need. This reflects the Kuwaiti government's (Aa2 stable) track record in supporting all banks encountering difficulties, including Gulf Bank in 2009. It also reflects Gulf Bank's systemic importance as the fourth largest bank in Kuwait in terms of assets. Moody's thus incorporate four notches of government support into the bank's deposit ratings, rating them at A3.