London: Fitch Ratings has affirmed Doha Bank Q.P.S.C.’s (DB) Long-Term Issuer Default Rating (IDR) at ‘A’ with a Stable Outlook. At the same time, the agency has affirmed DB’s Viability Rating (VR) at ‘bb+’. A full list of rating actions is at the end of this rating action commentary.
DB’s IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch’s expectation of an extremely high probability of support from the Qatari authorities for domestic banks in case of need. This reflects Qatar’s strong ability to support its banks, as indicated by its rating (AA-/Stable), combined with Fitch’s belief that there is a strong willingness to support the banking sector and the bank. The latter is based on a strong track record of sovereign support to the banking sector including i) 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; and ii) during 2H17 when the Qatari authorities placed significant deposits across the banks to support sector liquidity following the start of the blockade between Qatar and some of its neighbours. The government owns stakes in all Qatari banks.
The government has demonstrated a strong commitment to its banks and key public sector companies. The sovereign’s capacity to support the banking system is sustained by significant sovereign reserves and revenues, mostly from hydrocarbon production, despite lower oil prices.
DB’s SRF is at the Qatari bank’s domestic systemically important bank (D-SIB) SRF of ‘A’, and is not differentiated by franchise or level of government ownership because we believe there is 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 banks in the system) and the importance of the banking system in building the local economy.
DB’s asset quality metrics continued to deteriorate in 2018 and remain weaker than most peers. The impaired loans ratio increased to a high 5.9% at end-2018 (end-2017: 3.6%), primarily reflecting loan book seasoning in the bank’s contracting financing (16% impaired loans ratio in this segment) and problems in its Gulf Cooperation Council (GCC) operations (a high 35% of which is impaired, including lumpy exposures impacted by the political dispute). Non-performing loan (NPL) origination (net new NPLs/average loans) increased to a high 2.4% in 2018.