(MENAFN- Gulf Times) Capital Intelligence (CI), the international credit rating agency, has affirmed QNB's financial strength rating (FSR) at ‘AA-'.
The long and short term foreign currency ratings (FCRs) are also affirmed at ‘AA-' and ‘A1+', respectively, at the same level as the sovereign ratings for Qatar.
The bank's support rating of ‘1' (affirmed) reflects ownership by the country through the Qatar Investment Authority (QIA) and the bank's role as the financial arm of the Qatari government.
The FSR is supported by the bank's very good asset quality, strong capitalisation and good profitability, particularly at the operating level, it said.
While tight liquidity ratios remain the main constraining factor, 'the deposit base is sound and access to well diversified sources of international funding is good, CI said.
Moreover, the liquidity coverage ratio remains well in excess of the regulatory minimum; it said, adding a supporting factor for the rating is the ownership and geographical diversification of both the balance sheet and income streams.
Although the FSR is constrained by the small size of the population of Qatar and therefore the opportunities to grow domestic lending, it said QNB has successfully mitigated this by extensively diversifying its business internationally through organic growth and acquisitions.
Finding that liquidity conditions domestically have actually eased despite the blockade as a result of government action, CI sees this as confirmation that sufficient liquidity will continue to be made available to the banking system by the Qatari government as necessary.
The lender is also continuing to access the capital markets to further grow and diversify the longer-term funding base.
QNB had last month said it closed the syndication for its $3.5bn three-year senior unsecured term loan facility, supported by 21 international banks and the facility was upsized due to strong demand from the market.
Early this year, the lender also successfully completed its inaugural Kangaroo bond issuance as part of diversifying its funding sources. Under this programme, a A$700mn transaction was executed, with five and 10 year maturities.
QNB's foreign subsidiaries are self-funding with future forex translation risks on capital invested partially hedged, and therefore these factors are 'unlikely to exert significant downward pressure on the FSR, unless the levels of cross-border exposure increase markedly, CI said.
The rating agency expects asset quality and capitalisation to both remain good, with the capital adequacy ratio being maintained at around 16% by the issuance of additional Tier 1 or Tier 2 capital, if necessary.
The profitability should also remain good with any pressures on net interest margin (NIM) in Qatar being at least partially offset by the higher NIMs obtained in Egypt and Turkey.
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