Fitch Affirms the Rating of Commercial Bank
at “A” with “Stable” Outlook
March 24, 2019
Fitch Ratings has affirmed Commercial
Bank’s Long-Term Issuer Default Rating (IDR) at ‘A’ with a
stable outlook, short-term IDR at ‘F1’, viability rating (VR)
was downgraded to ‘bb+’ from ‘bbb’.
According to Fitch, Commercial Bank’s
IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect
the strong ability of Qatar to support its banks, as indicated
by its rating (AA-/Stable). Fitch stated, “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 sovereign reserves and revenues,
mostly from hydrocarbon production, despite lower oil prices.”
In its report, the ratings agency
said Commercial Bank’s profitability improved in 2018 as a
result of relatively lower loan impairment charges absorbing 36%
of pre-impairment operating profit (down from 74% in 2017) and
lower operating expenses. The cost-to-income ratio, which has
been a constraint on the bank's profitability, continued its
downward trend to 31% in 2018 from above 40% previously,
standing closer to peers.
Despite loan book re-pricing,
Commercial Bank’s net interest margin dropped only slightly to
1.98% in 2018 from 2.01% in 2017.
The Fitch report also maintained that
Commercial Bank's debt issuance represented about 13% of total
funding at end-2018, which helped diversify the bank's funding
and maturity profile. The share of non-domestic deposits dropped
to 15% at end-2018 from a very high 29% previously.
According to Fitch, “Commercial Bank
has a good stock of liquid assets, with government securities,
interbank placements and cash balances less mandatory reserves
covering about 40% of total deposits at end-2018 (about 30% with
net interbank funding).”
Commercial Bank group CEO Joseph
Abraham said, “Thanks to the prudent economic management by the
State of Qatar and the Qatar Central Bank since the blockade,
the country rating outlook remains stable, and for Commercial
Bank the affirmation by Fitch is a reflection of the strong
execution of our five-year strategic plan. The first phase of
our plan has been completed. We are achieving everything that we
set out to do two years ago in terms of careful management of
our capital position, taking provisions for our legacy loan
book, reducing our cost to income ratio, de-risking and
re-shaping our balance sheet, and continuing to build our
franchise based on innovation and new technology. In phase two,
we aim to continue with uplifting our business performance. We
are pleased by Fitch’s affirmation and we will continue to
deliver against our strategic plan.”
Including Fitch Ratings, Commercial
Bank currently enjoys strong credit ratings from all the major
ratings agencies. The bank’s long-term outlook is rated “A3” by
Moody’s and “BBB+” from Standard & Poor’s. All ratings are with
a stable outlook.
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