Fitch Places 8 Qatari Banks on Rating Watch Negative
Fitch Ratings has placed the Long-Term Issuer Default Ratings (IDRs) and Government Support Ratings (GSRs) of all eight Qatari banks on Rating Watch Negative (RWN).
These creditworthiness ratings of Qatari Public Shareholding Company (Q.P.S.C.) were affected following Fitch Ratings’ sovereign review last month, according to the rating note.
The banks are Qatar National Bank (Q.P.S.C.)(QNB), Qatar Islamic Bank (Q.P.S.C.) (QIB), AlRayan Bank (Q.P.S.C.), The Commercial Bank (P.S.Q.C.) (CBQ), Doha Bank Q.P.S.C., Dukhan Bank Q.P.S.C., Qatar International Islamic Bank (Q.P.S.C.) (QIIB) and Ahli Bank Q.P.S.C. (ABQ).
In its rating note, Fitch said the Short-Term IDRs of all banks, except QNB, have also been placed on RWN. The banks’ Viability Ratings (VRs), ex-government support (xgs) ratings and QNB’s Short-Term IDR are unaffected, Fitch said.
The rating actions follow a similar action on Qatar’s sovereign rating in March and reflect Fitch’s view of a potentially weaker ability of the Qatari authorities to support the banks.
The eight banks’ Long-Term IDRs are driven by potential sovereign support, as reflected in their GSRs. The RWN on the banks’ GSRs and Long-Term IDRs mirror that on the Qatari sovereign rating (AA/RWN) and reflects Fitch’s view that Qatar’s ability to support the domestic banks could come under pressure.
This is due to uncertainty over Qatar’s security environment post-Iran war, the risk of a downside scenario of a prolonged conflict or further damage to Qatar’s oil and gas infrastructure, which could further affect Qatar’s sovereign rating, as indicated by the RWN.
QNB’s GSR of ‘a+’ is one notch above Fitch’s domestic systemically important bank (D-SIB) GSR for Qatari banks, given its flagship status, its role in the Qatari banking sector, and its close business links with the state.
QIB’s, CBQ’s, AlRayan’s, Doha’s, Dukhan’s, QIIB’s, and ABQ’s GSRs of ‘a ‘ are in line with Fitch’s D-SIB GSR of ‘a ‘. This reflects Fitch’s view that the Qatari authorities have a strong propensity to support domestic banks, irrespective of their size or ownership.
Fitch stated that they also have a strong ability to do so, as indicated by the sovereign rating and substantial net foreign assets and revenue, albeit weakened by the Qatari banking sector’s high reliance on external funding and rapid asset growth in recent years.
The ‘a’ GSR for Qatari D-SIBs is three notches below the sovereign ‘AA’ IDR. QIB’s, CBQ’s, AlRayan’s, Doha’s, Dukhan’s, QIIB’s and ABQ’s Short-Term IDRs of ‘F1’ are the lower of two options mapping to Long-Term IDRs of ‘A’ because a significant proportion of the banking sector’s funding is government-related, and financial stress at these banks likely to come at a time when the sovereign itself is experiencing some form of stress.
