Global Arab Network | CI affirms Commercial Bank of Qatar’s ratings with negative outlook

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CI affirms Commercial Bank of Qatar’s ratings with negative outlook

Friday, 26 March 2010 12:52

Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed The Commercial Bank of Qatar’s (Cb) long-term foreign currency rating of ‘A’, its short-term foreign currency rating of ‘A2’ and its financial strength rating of ‘A’.

However, a ‘Negative’ outlook is appended to the foreign currency and financial strength ratings given the marked deterioration in the Bank’s loan asset quality.
At the same time CI affirms the support rating of 2, which underpins Cb’s ratings and captures the recently demonstrated government financial support of the Qatari banking system, including support of Cb itself, following the onset of the international financial crisis.

The ratings are supported by the Bank’s good access to medium and long term sources of capital which, together with government support, has enabled Cb to improve its solid capital adequacy and overall funding profile. The ratings also reflect Cb’s good interest differential and strong franchise. However, the ratings are significantly constrained by the Bank’s worsening asset quality, low share of government business and weak net loans/customer deposits ratio.

In 2009 the Bank completed a major funding exercise in the international capital markets which allowed it to substitute more expensive time deposits and improve its interest differential. Net income and profitability weakened due to lower non-interest income and high loan-loss provisioning. The Bank followed a policy of downsizing its balance sheet by reducing growth in consumer and real estate loans, but loan asset quality worsened. This was, in part, a reflection of the Bank’s higher borrower concentration risk, but also due to the relatively small proportion of lower risk government sector loans within Cb’s largely private sector portfolio.

Cb was the first wholly privately owned bank to be established in Qatar in 1975 with prominent local businessmen as its founding shareholders. Following a special issue of shares as part of the government’s assistance programme for banks in 2009, the Bank’s single largest shareholder is now the Qatar Investment Authority, the country’s sovereign wealth fund, with a 9.09% stake.

The Bank holds the second largest franchise in Qatar and has also built up a regional presence in UAE and Oman through equity participations in associate banks.

Global Arab Network

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