Moody's affirms Qatar National Bank's deposit ratings at Aa3

Bank rating action follows the downgrade of the Qatar Government rating to Aa3 from Aa2, with a stable outlook

31/05/2017 12:08 AST

Moody's Investors Service has affirmed and changed the outlook to stable from negative, on the Aa3 long-term deposit rating of Qatar National Bank (QNB). At the same time, it has downgraded the bank's long-term Counterparty Risk Assessment (CRA) to Aa3(cr) from Aa2(cr).

The ratings and rating inputs that are unaffected by today's action are Qatar National Bank's baa1 baseline credit assessment (BCA), baa1 adjusted BCA, Prime-1 short-term deposit ratings and QNB Finance Ltd (P)A2 Backed Subordinate MTN rating.

The rating action follows Moody's downgrade of Qatar's government issuer rating to Aa3 with a stable outlook on 26 May 2017.

The key driver for the affirmation of the Aa3 deposit rating is based on Moody's view of a continued very high likelihood of Qatari government support, despite the downgrade of its rating. This continues to translate into four notches of uplift for the bank's long-term deposit ratings, from its baa1 BCA. Moody's support assumptions take into account the capacity and willingness of a government to provide support to the bank in case of need. Moody's expects the Qatari government's willingness to provide support to QNB will remain 'very high' given that QNB: (1) is the country's largest bank, with around 45 per cent market share in the domestic system; (2) is a domestic systemically important bank and has an important role in the functioning of government's payments; and (3) benefits from strong linkages with the Qatari government which is also the largest shareholder, with a 50 per cent direct stake in the bank. The Qatari authorities' also have a strong track record of supporting the country's banks.

QNB's long-term CRA has been downgraded to Aa3(cr) from Aa2(cr), constrained by the local currency deposit ceiling which has also been lowered to Aa3 following the downgrade of the government's rating.

Moody's has changed the outlook on QNB's long term ratings to stable from negative, in line with the stable outlook on the government's rating, which signals that the government's capacity to provide support is expected to remain unchanged over the outlook period.

Upward pressure on QNB's ratings could develop if the bank: (1) maintains its sound financial performance following its significant expansion outside Qatar; and (2) reduces significantly its borrower and depositor concentration.

Downwards pressure on QNB's ratings could develop from: (1) further lowering of the government's rating, that would lead to reduced support capacity and/or a reassessment of the willingness of government support; (2) a material deterioration in the bank's operating environment resulting in a weakening in its solvency and liquidity; or (3) pressures resulting from its expansion into markets more risky than its home jurisdiction.

CPI Financial