Fitch affirms Commercial Bank’s rating at ‘A’ with stable outlook

Doha, Qatar Fitch Ratings 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) reflects 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 cited 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 Commercial 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.

Fitch report also maintained that Commercial Bank debt issuance represented about 13% of total funding at end-2018, which helps diversify the Bank’s funding and maturity profile. With the political dispute, 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).

Joseph Abraham, Group Chief Executive Officer of Commercial Bank said: Due 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 and Poor’s. All ratings with stable outlook.

Source: Commercial Bank