Fitch Ratings has affirmed Qatar National Bank’s (QNB’s) long-term issuer default rating (IDR) at AA- with a stable outlook and has placed QNB’s viability rating (VR) of a on rating watch negative (RWN) following QNB’s proposed acquisition of Finansbank.
The RWN primarily reflects Fitch’s view that this acquisition will increase QNB’s overall risk profile.
Fitch said Finansbank (BBB-/Stable/bbb-) is a fairly well-capitalised and profitable bank, but the Turkish operating environment is significantly weaker and more volatile than that of QNB’s home market in Qatar. We also take into account the effect of this acquisition on QNB’s capital levels. The RWN will be resolved on completion of the acquisition, following regulatory approval from the Qatari and Turkish authorities. Fitch does not anticipate a downgrade of more than one notch.
QNB’s IDRs, support rating (SR) and support rating floor (SRF) reflect Fitch’s expectation of support from the Qatari authorities for domestic banks in case of need. Fitch’s expectation of support from the authorities reflects Qatar’s strong ability to provide support to its banks, as indicated by its rating (AA/Stable), combined with Fitch’s belief that there would be a strong willingness to do so. The latter is based on a history of sovereign support including recent years’ measures to boost capital as well as asset purchases.
The government has demonstrated strong commitment to its banks and key public-sector companies and we expect this to continue despite the effects of lower oil prices. The sovereign’s capacity to support the banking system is sustained by its sovereign wealth funds and on-going revenues, mostly from its hydrocarbon production. Fitch makes a distinction between QNB’s SRF and that of the other banks in Qatar as a result of its status as the flagship bank in the sector, its role in the Qatari banking sector and close business links with the state. In addition, the government owns a 50% stake in QNB.