S&P confirms Doha Bank’s credit ratings

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PARIS: Standard & Poor’s Ratings Services announced yesterday that it has affirmed its “A-/A-2” long and short-term counterparty credit ratings on Qatar-based Doha Bank. The outlook is stable.

The assertion follows the bank’s announcement on March 26 that it had succeeded in raising its capital by around 25% through the issuance of 51.7 million new shares.

“We believe the capital increase will allow the bank to participate in strong loan growth in Qatar and maintain strong capital ratios. In addition, the bank’s capitalization is now more in line with that of its domestic rated peers,” an S&P statement said yesterday.

Doha Bank raised about QR 1.5 billion in March through the issuance of new shares subscribed by existing shareholders. The bank has publicly disclosed that it may raise additional capital in the form of global certificates of deposit (GDRs), although no details have been disclosed. The recent capital increase and issuance of the GDR, if executed, should dampen the bank’s likely rapid loan growth.

“We are therefore less concerned about the bank’s capitalization, especially since the transaction is likely to increase the bank’s risk-adjusted capital ratio, our key figure in analyzing a bank’s capital, to about by 13%. However, we expect this ratio to remain below the 15% threshold that we typically associate with “very strong” capital and earnings, by our criteria. We expect the bank’s capitalization to erode moderately 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 associated with potential rapid asset growth, maturity mismatches and stiff competition.

The rating agency said it could upgrade Doha Bank’s ratings if it increases the granularity of its loan portfolio and funding base, while improving asset quality and maintaining strong capitalization.

“We could downgrade the ratings if Doha Bank’s concentration risk materializes across the balance sheet, which could undermine the bank’s funding and liquidity profile or risk position,” the statement said. agency.

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