July 02 -
Summary analysis — Qatar Islamic Bank (S.A.Q) —————————— 02-Jul-2012
CREDIT RATING: A-/Stable/A-2 Country: Qatar
Primary SIC: Commercial banks,
Credit Rating History:
Local currency Foreign currency
12-Apr-2012 A-/A-2 A-/A-2
Ratings Score Snapshot
Issuer Credit Rating A-/Stable/A-2
Business Position Adequate (0)
Capital and Earnings Strong (+1)
Risk Position Weak (-2)
Funding and Liquidity Average
and Adequate (0)
GRE Support 0
Group Support 0
Sovereign Support +3
Additional Factors 0
Major Rating Factors
— Strong position in Qatar’s fast growing Islamic banking market.
— Favorable operating environment, in line with the recent regulations restricting conventional banks’ lending in Qatar through their Islamic subsidiaries.
— Strong capitalization.
— Large single-party concentration risk.
— High exposure to construction and real estate.
— High dependence on income from corporate lending.
Standard & Poor’s Ratings Services’ outlook on Qatar-based Qatar Islamic Bank (S.A.Q) (QIB) is stable. The outlook reflects our expectation that QIB will remain an important player in Qatar, with no significant change in its business and financial profiles over the next 12 to 24 months. We expect strong balance sheet growth accompanied by continued high dividend payouts. We nevertheless anticipate that QIB’s capital and earnings will remain strong, as we project that QIB’s risk-adjusted capital (RAC) ratio before adjustments will remain between 13.5% and 14% in the next 18 to 24 months.
We would lower the ratings on QIB if we perceived deterioration in its business position owing to continued increase in competition. However, this scenario seems unlikely in light of recent favorable regulation on Islamic banking. Similarly, if we were to see an unexpected deterioration in QIB’s funding and liquidity profile, we would lower our stand-alone credit profile and ratings on QIB.
A positive rating action, although quite remote at this stage, would likely result from an improvement in our assessment of the bank’s risk position from “weak” to “moderate” in the case of a major reduction in the bank’s exposure to real estate and construction, and less aggressive asset growth.
Related Criteria And Research
— Banks: Rating Methodology And Assumptions, Nov. 9, 2011
— Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
— Group Rating Methodology And Assumptions, Nov. 9, 2011
— Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011