August 30, 2017 / 4:48 PM / a year ago

Fitch Downgrades 9 Qatari Banks' IDRs; Outlooks Negative

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Fitch Downgrades 9 Qatari Banks’ IDRs; Outlooks Negative here LONDON, August 30 (Fitch) Fitch Ratings has downgraded nine Qatari banks' Long-Term Issuer Default Ratings (IDR). Apart from Qatar National Bank (Q.P.S.C) (QNB), which has been downgraded to 'A+' from 'AA-', the rest of the banks have been downgraded to 'A' from 'A+'. They are The Commercial Bank (Q.S.C.) (CBQ), Doha Bank (DB), Qatar Islamic Bank (S.A.Q) (QIB), Al Khalij Commercial Bank P.Q.S.C. (AKB), Qatar International Islamic Bank (QIIB), Ahli Bank Q.S.C (ABQ), International Bank of Qatar (Q.S.C) (IBQ) and Barwa Bank Q.S.C. (Barwa). All Outlooks are Negative. This action follows the downgrade of the Qatari sovereign by one notch to 'AA-' (see Fitch Downgrades Qatar to 'AA-' Negative Outlook, dated 28-August-2017 on and reflects Fitch's view that a timely resolution to Qatar's isolation is unlikely, although further risk of escalation has declined. It also reflects the impact that the measures have had on Qatar's external balance sheet, with an expected fall of sovereign net foreign assets to 146% of GDP in 2017 from 185% in 2016, and our expectation that GDP growth will slow to 2% in 2017. Ultimately, the sovereign ability to support the banking system has weakened and all nine banks' IDRs have been downgraded to reflect this. The banks' Viability Ratings (VR) are unaffected by this action. The VRs remain on Rating Watch Negative (RWN) and reflect the heightened risks that this crisis places on the banks' operating environment, funding and liquidity and earnings and profitability. Depending on business model and funding and liquidity profile, the current crisis might affect some banks more than others, although we expect all banks to be affected to a certain extent. Banks with lower reliance on non-domestic deposits (such as IBQ, Barwa and QIIB) may be more immune to the above-mentioned pressures. Increased competition for domestic deposits will impact the liquidity profile and funding costs of all banks to varying degrees. We would expect margins to come under strain across the banking system. The current crisis could also affect the ability of all banks to raise foreign term funding and to term out their funding profiles. Fitch would expect the first large impact to be visible in 2H17. This is on top of Fitch's previous expectation that economic growth will slow in 2017 and 2018, reflecting a less benign fiscal environment, contraction in current spending and a focus on fiscal efficiency leading to a slowdown of both private and public sector growth. The RWN on all ratings, except the VRs, has been removed. The RWN on the banks' VRs will be reviewed once the impact of the current crisis is more clear, likely to be in early 4Q17. A full list of rating actions is available at or by clicking the link above. KEY RATING DRIVERS IDRs, Support Ratings (SRs) and Support Rating Floors (SRFs) The IDRs, SRs and SRFs of all Qatari banks reflect Fitch's expectation of an extremely high probability of support from the Qatari authorities for domestic banks in case of need. This reflects the strong ability of Qatar to support its banks, as indicated by its rating (AA-/Negative), combined with Fitch's belief of a strong willingness to do so. The latter is based on a track record of sovereign support between 2009 and 1Q11 when some banks received capital injections to enhance their capital buffers and the government purchased some problem assets from the banks following the global financial crisis. The government owns stakes in all Qatari banks. The government has demonstrated a strong commitment to its banks and key public sector companies, which has been reaffirmed during this crisis. The sovereign's capacity to support the banking system remains very strong owing to solid sovereign reserves and revenue, mostly from hydrocarbon production, but could weaken if the current crisis is prolonged. Qatari banks' SRFs are not differentiated by franchise or level of government ownership because we see an extremely high probability that all rated Qatari banks would receive support should they require it. This belief also partly reflects the risk of contagion (small number of banks and high concentration of the banks in the system) and the importance of the banking system in building the local economy. As a result, Fitch equalises all Qatari banks' SRFs and IDRs at 'A'. QNB is the exception, rated one notch higher at 'A+' to reflect its flagship status, its role in the Qatari banking sector and its close business links with the state. The Negative Outlook on the Long-Term IDRs of all banks mirrors that on the Qatari sovereign. We assign Short-Term IDRs according to the mapping correspondence described in our rating criteria. An 'A+' Long-Term IDR can correspond to a Short-Term IDR of either 'F1' or 'F1+'. In the case of QNB, whose Long-Term IDR is 'A+', we opted for 'F1', the lower of the two Short-Term IDR options. This is because a significant proportion of the bank's funding is related to the government and a stress scenario for the bank is likely to come at a time when the sovereign itself is experiencing some form of stress. SPVs AND SENIOR DEBT The ratings of debt issued by the banks' special purpose vehicles (SPV) are in line with the parents' Long- or Short-Term IDRs, because Fitch views the likelihood of default on any senior unsecured obligation issued by the SPVs the same as the likelihood of the default of the bank. RATING SENSITIVITIES IDRS, SRs AND SRFs The IDRs, SRs and SRFs are sensitive to a change in Fitch's assumptions around the Qatari authorities' propensity or ability to provide timely support to the banking sector. A further downgrade of the sovereign would result in a further downgrade of all nine banks' IDRs. SPVs AND SENIOR DEBT The ratings of debt issued by the SPVs are sensitive to changes in their respective parents' IDRs. Contact: Primary Analyst Redmond Ramsdale Senior Director +44 20 3530 1836 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analysts Zeinab Abdalla (QNB, CBQ, AKB, ABQ) Associate Director +971 4 424 1210 Huseyin Sevinc (QIIB, DB, IBQ) Associate Director +44 20 3530 1027 Nicolas Charreyron (QIB, Barwa) Analyst +971 4 424 1208 Committee Chairperson Alexander Danilov Senior Director +7 495 956 2408 Media Relations: Rose Connolly, London, Tel: +44 203 530 1741, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Sukuk Rating Criteria (pub. 14 Aug 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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