Reuters logo
Fitch Downgrades 9 Qatari Banks' IDRs; Outlooks Negative
August 30, 2017 / 4:48 PM / 2 months 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 www.fitchratings.com.) 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 www.fitchratings.com 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: rose.connolly@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com 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#solicitation 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. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below