PARIS: Standard & Poor’s Ratings Services yesterday said that it had affirmed its ‘A-/A-2’ long- and short-term counterparty credit ratings on Qatar-based Doha Bank. The outlook is stable.
The affirmation follows the bank’s announcement on March 26 that it had successfully raised its capital by about 25 percent through the issuance of 51.7 million new shares.
“We believe the capital increase will enable the bank to participate in Qatar’s strong lending growth and maintain strong capital ratios. Furthermore, the bank’s capitalization is now more in line with that of its rated domestic peers,” a release from S&P said yesterday.
Doha Bank raised about QR1.5bn in March through the issuance of new shares subscribed by the existing shareholders. The bank publicly disclosed that it might raise additional capital in the form of global depositary receipts (GDRs), although no details were disclosed. The recent capital increase, and the GDR issuance if executed, should mitigate the bank’s likely rapid loan growth.
“We are therefore less concerned about the bank’s capitalisation, especially given that the transaction will likely boost the bank’s risk-adjusted capital ratio, our key figure in analysing a bank’s capital, to almost 13 percent. However, we expect this ratio to remain at less than the 15 percent threshold we usually associate with “very strong” capital and earnings, according to our criteria. We expect the bank’s capitalisation to moderately erode over the next few years, following a rapid increase in lending for infrastructure development,” S&P said.
The stable outlook balances Doha Bank’s strong capital and earnings against the risks attached to potential rapid asset growth, maturity mismatches, and strong competition.
The ratings agency said it could raise the ratings on Doha Bank if it increased the granularity of its loan portfolio and funding base, while improving asset quality and maintaining strong capitalisation.
“We could lower the ratings if Doha Bank’s concentration risk materialised on either side of the balance sheet, which could undermine the bank’s funding and liquidity profile or risk position,” the agency said.
The Peninsula
