December 10, 2012 / 3:20 PM / in 5 years

TEXT-Fitch affirms Al Khalij Commercial Bank at 'A-'

Dec 10 - Fitch Ratings has affirmed Al Khalij Commercial Bank (al khaliji)
Q.S.C.'s (Al Khaliji) Long-term Issuer Default Rating (IDR) at 'A-'
with a Stable Outlook and Viability Rating (VR) at 'bb+'. A full list of rating
actions is at the end of this release.

Al Khaliji's Long- and Short-term IDRs, Support Rating and Support Rating Floor
reflect the extremely high probability of support, in Fitch's opinion, from the
Qatari authorities if needed. Fitch's view of likely support is based on the
strong history of support from the Qatari authorities for local banks, reflected
in recent support measures. While Fitch views Al Khaliji's small size and
evolving franchise as constraints from a support perspective, the agency also
considers the Qatari government's overall 47% indirect stake as a positive.

A change in Fitch's view of the willingness or ability of the Qatari authorities
to support Al Khaliji would be negative for its IDRs, Support Rating and Support
Rating Floor.

The VR reflects the bank's high concentrations on both sides of the balance
sheet, moderate profitability, short track record and small franchise size. It
also reflects Al Khaliji's strong capitalisation, experienced management team
and coherent strategy. Given the strong overall prospects for the Qatari
economy, Fitch believes the bank will expand and perform better over the rating

Al Khaliji's financial performance is modest but improving, and reflects its
start-up character. Although funding costs are relatively low, its spreads on
assets suffer from the high proportion of lower-yielding fixed-income securities
on its balance sheet, and the short average tenor of its loan book.

Asset quality has remained sound to date, primarily due to its unseasoned book
and low risk focus. Given its high single-name concentration, risks to asset
quality from a single borrower are significant.

Al Khaliji's funding base is dominated by deposits from the Qatari government,
government-related entities, interbank and repo sources. The latter is
confidence-sensitive and not a permanent source of funding for the bank.
Single-name concentration within its funding base is very high, although its
largest deposits are mainly sourced from government names and tend to be stable.

Upside potential for the VR would require Al Khaliji to build its franchise and
further develop and diversify its business around the growing Qatari economy. A
delay in the strategy being deployed leading to the loss of market share and
weaker performance or any deterioration in asset quality, profitability or
capital could pressure Al Khaliji's VR.

The rating actions are as follows:

Long-Term IDR affirmed at 'A-' with a Stable Outlook
Short-Term IDR affirmed at 'F2'
Viability Rating affirmed at 'bb+'
Support Rating affirmed at '1'
Support Rating Floor affirmed at 'A-'

Additional information is available on The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria' dated 15
August 2012 is available at

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
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