15/02/2012 07:45 AST
Fitch Ratings has assigned ‘A-’ rating on Qatar’s al khaliji a long-term foreign currency issuer default rating (IDR) with a stable outlook.
It has also assigned short-term IDR of ‘F2’, viability rating (VR) of ‘bb+’, support rating of ‘1’ and support rating floor of ‘A-’.
The long and short-term IDRs and support rating reflect the extremely high probability of support, in Fitch’s opinion, from the Qatari authorities if needed.
“The award of these strong credit ratings from a respected name such as Fitch in these challenging economic times is pleasing. The ratings we received are a confirmation of team commitment to executing the strong medium term strategy and business model, coupled with specifically focusing on Qatar and selectively on the GCC (Gulf Cooperation Council),” said al khaliji CEO Robin McCall.
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 franchise as constraints from a support perspective, it considers the Qatari government’s overall 47% indirect stake as a “positive”.
The bank’s financial performance is moderate, but on an improving trend, and reflects its start-up character. Its net interest margin is narrow.
While funding costs compare favourably, its spreads on assets suffer from the high proportion of lower yielding fixed income securities on its balance sheet, when compared with Qatari peers, and the short average tenor of its loan book.
Fitch expects performance to improve with the bank generating higher business volumes and starting to benefit from increasing economies of scale.
Asset quality has remained sound to date, with a non-performing loans ratio of 0.8% at the end of September 30, 2011. However, due to its short track record, Fitch does not consider that the loan-book has seasoned yet.
Impaired loans are comfortably covered by reserves, it said; adding exposures classified as past-due but not impaired are high, driven by one large exposure which is in the process of being restructured. Given its high single-name concentration, risks to asset quality from a single borrower are significant, Fitch said.
The bank’s core capital ratio stood at a strong 24% as on September 30, 2011. Leverage is low. This is partly due to the bank still being in a start-up phase but management is aiming to maintain a Tier 1 capital ratio of at least 15% in the long run, according to Fitch.
During the first nine months of 2011, the ten largest depositors accounted for a high 45% of non-equity funding, of which 62% related, directly and indirectly, to Qatar government related entities, it said.
Observing that liquidity position benefits from the bank’s substantial holdings of Qatari government debt and low loan/deposit ratio, Fitch said it was supported by unencumbered, ‘repoable’ securities which stood at QR4.3bn at the end of September 30, 2011.
Gulf Times
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