(MENAFN Press) 28 November 2012
Ahli Bank Qatar's Ratings Affirmed with 'Stable' Outlook
Capital Intelligence (CI), the international credit rating agency, announced today that it has affirmed Ahli Bank Qatar (ABQ)'s Financial Strength Rating (FSR) of 'BBB', on 'Stable' Outlook, on the basis of the recent increase in shareholders' funds, sound asset quality, and good profitability. The FSR is constrained by ongoing concentration risks, narrower than average interest differential, and the small Qatari banking market. The Bank's Long and Short-Term Foreign Currency (FC) Ratings of 'A-' and 'A2', respectively, are affirmed based on the Qatari government's demonstrated financial support for Qatari banks, and the ownership and management control by Ahli United Bank (AUB). Accordingly, the Support level is affirmed at '2'. The Outlook for the FC ratings is 'Stable'.
ABQ is an important member of the AUB group, enjoying strong management and financial backing available to the other banks which are part of its pan-GCC parent. The Bank has established clear strategies and procedures in its operations, with assistance from AUB to build and develop the franchise. Given a diversified business model focused on commercial banking, trade finance and retail, the Bank is well prepared to benefit from continued strong economic growth in Qatar which is due to ongoing high hydrocarbon prices. 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 its loan portfolio.
Liquidity is comfortable and continues to be supported by customer deposit funding, particularly by a rising share of low-cost retail deposits. This remains so despite a contraction in customer deposits in 2011 due to regulatory changes which have imposed a complete separation of conventional and Islamic banking activities. In this regard, it is noteworthy that the Bank succeeded in retaining a significant share of customers who agreed to transfer their business to conventional from Islamic.
ABQ's business model is such that maintaining a sound risk profile and good return on equity take precedence over balance sheet size. The quality of the loan portfolio remained good notwithstanding the recent increase in NPLs. Although loan-loss reserve coverage dropped in Q3 2012 it remained at a satisfactory level and is projected to improve in the final quarter as the Bank continues to build up the required provisions. ABQ's profitability at both the net and operating levels is good, supported by good income generation and effective cost control. Although operating profit retreated in the first nine months of 2012 over the same period a year earlier due to the impact of regulatory changes, net profit and ROAA were boosted by provision write-backs.
Ahli Bank Qatar is the name adopted for the erstwhile 'Al-Ahli Bank of Qatar' after AUB acquired its major stake in the Bank in 2004. The Bank was re-branded as 'Ahli Bank Qatar' with a new corporate identity and new management team that saw a successful transition to a member of the AUB group. AUB retains the largest shareholding in ABQ although its stake was diluted to 29.4% after the recent rights issue to Qatari shareholders. The Qatar Investment Authority (QIA), through its subsidiary Qatar Holding Company, holds 16.67% of shares and members of the public the remaining 53.92%. At end-September 2012, the Bank's total assets were QAR19.7 billion (USD5.4 billion) and total capital QAR3.08 billion (USD848mn).
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 2011.
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