Fitch Affirms Doha Bank at ‘A’; Outlook Stable
Fitch Ratings has affirmed Doha Bank Q.P.S.C.’s (DB) Long-Term Issuer Default Rating (IDR) at ‘A’ with a Stable Outlook.
DB’s IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch’s expectation of an extremely high probability of support from the Qatari authorities for domestic banks in case of need. This reflects the strong ability of Qatar to support its banks, as indicated by its rating (AA-/Stable), combined with Fitch’s belief of a strong willingness to support the banking sector, including DB.
Nevertheless, our assessment of DB’s standalone creditworthiness is underpinned by the well-established domestic franchise in Qatar of the fifth-largest bank, with market shares of about 6%-7% in loans and deposits at end-1H19.
DB’s NPL ratio improved slightly in 9M19, due mainly to QAR537 million of write-offs, while loan growth (about 9%) was at the higher end of peers’.
NPL origination (net new NPLs/average performing loans) also remains high (9M19: 1.7% annualized), although it has decreased from its peak (2018: 2.3%). Total reserve coverage of impaired loans was 141% at end-3Q19. However, specific coverage of Stage 2 loans was just 8%. Real-estate exposures are typically well covered with collateral, although collateral realisation could be a lengthy process.
DB’s FCC ratio of 12% at end-3Q19 was lower than most peers’. It fell materially in 2018, due primarily to the impact of IFRS9 implementation but has since improved slightly. The improvement reflected the optimisation of RWAs – including growth in lower-risk weighted Qatari sovereign securities – and a lower dividend pay-out in 9M19. DB’s high coverage of NPLs mitigates risks to capital from existing impaired loans.
Dr. R. Seetharaman, Chief Executive Officer of Doha Bank, said that “Fitch ratings recognized support of Qatari authorities for banking system in Qatar. The government has demonstrated a strong commitment to its banks and key public sector companies, which has been reaffirmed during past crisis. The reforms such as new investment law, real estate law, PPP Law, food security and tourism and Free trade zone development will contribute to Qatar’s non hydrocarbon segment.”