(MENAFNEditorial) 7th April 201
Qatar Islamic Bank's Ratings Affirmed on 'Stable' Outlook
Capital Intelligence (CI), the international credit rating agency, announced today that it has affirmed Qatar Islamic Bank's (QIB's) Financial Strength Rating (FSR) of 'A'. The Outlook on the FSR is changed to 'Stable' in view of the significant improvement in financing asset quality and because, although still relatively low, ROAA has stabilised. The Bank's Long- and Short-Term Foreign Currency Ratings (FCR) are affirmed at 'A' and 'A2', respectively, on 'Stable' Outlook in view of the Bank's intrinsic financial profile, Qatar's economic growth potential, and ongoing government support for all Qatari banks. Based on the strength of the Qatari government balance sheet, the Support Rating is affirmed at '2'.
The FSR is supported by the Bank's low leverage and good capital adequacy ratios, as well as by improved liquidity – which have benefited from more efficient use of capital and sustained growth in customer deposits. Growth in credit risk weighted assets was contained through measured growth in financings, while market risks were reduced through more centralised risk management and sale of investment properties – allowing the Bank to improve its capital adequacy ratio (CAR), which stands at a good level in both absolute and relative terms.
Growth in the total asset base slowed last year as the Bank focused on improving its asset quality. Non-Performing Facilities (NPFs) fell rapidly through collections, and despite write-offs financing loss reserve coverage rose significantly through further provisioning. Renegotiated financings were drastically reduced. Broader asset quality measures such as less than 90 day past due financings also improved in both absolute and relative terms.
Greater control of associate banks and real estate subsidiaries should enable the Bank to better manage its international activities and to reduce the legacy investment portfolio through sales and provisioning. However, real estate development assets will continue to place a burden on free capital. Concentration to real estate market risk and to credit risk on the financing portfolio therefore continue to constrain the rating – although both are expected to gradually reduce as the Bank aims for more government sector and SME financing business within its asset base.
Fee and commission income decreased as the Bank continued to reduce higher risk financing and investment banking business. Nonetheless, CI believes that the Bank is already on a better trajectory which should deliver more sustainable long term profitability. Although the situation of the Qatari economy and QIB's strong Islamic banking franchise are expected to underpin a return to higher growth and profitability once the strategic transformation is complete, the FSR is constrained by the fall in net financial margin and loss of non-recurring sources of non-financial income. Continued impairment charges on the legacy investment security portfolio are likely to be a drag on net profit for some time.
QIB was the first Islamic banking institution to be incorporated in Qatar in 1982. The Bank's single largest shareholder is the Qatar Investment Authority with 16.67%. With total assets at end 2013 of USD 21.2 billion, QIB is the third largest bank in the local market with a 9% market share of assets. It is also the leading Islamic bank with a prominent position in wholesale, retail and investment banking. The Bank provides a full range of Islamic investment and financing services through various Shari'a compliant products for both corporate and retail clients. As a specialised project finance institution, QIB is involved in financing projects most notably in the infrastructure, oil and gas and property development sectors, many of which are closely related to Qatar's economic development. QIB is also considered to be a major player regarding the issuance of sukuk in Qatar and internationally through its affiliates in London and Malaysia. On March 24th 2014, QIB announced that it was in discussions with Asya Katilim, Turkey's leading Islamic bank, with a view to acquiring a strategic stake
CONTAC
Primary Analys
Chris Nicolao
Senior Credit Analys
Tel: +357 25 34230
E-mail: chris.nicolaou@ciratings.co
Secondary Analys
Peter McFerra
Senior Credit Analys
E-mail: peter.mcferran@ciratings.co
Rating Committee Chairma
Morris Hela
Senior Credit Analys
The information source used to prepare the credit ratings is the rated entity. 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 January 1988. The ratings were last updated in April 2013
The principal methodology used in determining the ratings is Bank Rating Methodology. The methodology, the meaning of each rating category, the time horizon of rating outlooks and the definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com. Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at http://cerep.esma.europa.e
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