Ahli Bank Qatars Long-Term Foreign Currency and Financial Strength Ratings Upgraded, on Stable Outlook
(MENAFN Press) Capital Intelligence (CI), the international credit rating agency, announced today that it has raised Ahli Bank QSC (ABQ)'s Long-Term Foreign Currency (FC) Ratings to 'A' from 'A-', on the basis of the Bank's strong credit profile and the increased ownership interest held by Qatar government entities (47.06%). The Short-Term FC Rating is affirmed at 'A2'. The Support Level is raised to '1' from '2', denoting the extremely high likelihood of support from the Bank's strong government shareholders, as well as from the Central Bank of Qatar. In view of ABQ's improved asset quality, ongoing strong profitability and solid capital adequacy, CI raises the Financial Strength Rating (FSR) to 'A-' from 'BBB'. The FSR is constrained by ongoing concentration risks in loans and customer deposits, as well as the Bank's comparatively small balance sheet. The Outlook for all the Ratings is 'Stable'.
ABQ underwent a significant change in ownership in January 2013 after the Qatar Foundation (a trust) purchased the 29.41% ownership interest of Ahli United Bank (AUB) based in Bahrain. Qatar Foundation, together with Qatar Investment Authority, now control close to one-half of the Bank's shares thereby ensuring a strong degree of financial support. ABQ had been run by AUB under a management agreement over the past. The newly constituted board has since appointed a former CEO to manage the Bank.
Although ABQ ranks among the smallest banks in the local market, it has nonetheless built and developed a successful business franchise. Being the beneficiary of a diversified business model focused on commercial banking, trade finance and retail, the Bank is well prepared to benefit from ongoing strong economic growth in Qatar due to high hydrocarbon prices and strong non-hydrocarbon activity. Through working with its majority sovereign shareholder structure, ABQ has a comparative advantage in terms of relevant contacts which it can leverage to develop the business franchise further. The increases in shareholders' funds in 2011 and in October 2012 have significantly raised the capital adequacy ratio and provided a solid basis for ABQ to further grow the credit portfolio.
As a result of settlements and write-offs, the quality of the loan portfolio improved significantly in the first nine months of the current year as demonstrated by the decline in NPLs. Loan-loss reserves (LLRs) provided more than full cover for NPLs in the same period testifying to a prudent provisioning policy. Liquidity is comfortable and continues to be supported by customer deposit funding, which grew particularly strongly in the first nine months of 2013 thanks to low-cost deposits. ABQ's profitability at both the net and operating levels remains strong, supported by good income generation and effective cost control. An improved NIM (CI estimated), thanks to the growing share of low cost deposits, coupled with sustained loan expansion has contributed to very healthy net interest income growth in Q1-Q3 2013. Concurrently, fee and commission income has continued to expand briskly and this has lifted the Bank's gross income as well as bottom line profitability.
ABQ's business is segmented into retail banking, grouped together with private banking and wealth management; corporate banking; and treasury and investments. Currently, Qatar Foundation is the largest single shareholder with 29.41% of ABQ's shares and QIA (through its subsidiary Qatar Holding Company) has a 17.65% shareholding, bringing the total shareholding by state-owned entities to 47.06%; other smaller investors in aggregate own 52.94% of the Bank's equity. At end-September 2013, the Bank's total assets were QAR23 billion (USD6.3 billion) and total capital was QAR3.4 billion (USD942mn).
Senior Credit Analyst
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Senior Credit Analyst
Rating Committee Chairman
Senior Credit Analyst
The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents for the purpose of the rating, and considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in October 1994. The ratings were last updated in November 2012.
The principal methodology used in determining the ratings is Bank Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com.
About CAPITAL INTELLIGENCE
Capital Intelligence (CI) has been providing credit analysis and ratings since 1985, and now rates over 400 Banks, Corporates and Financial Instruments (Bonds & Sukuk) in 37 countries. A specialist in emerging markets, CI's geographical coverage includes the Middle East, the wider Mediterranean region, Central and Eastern Europe, South Asia, South-East Asia, the Far East, and North and South Africa.
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