Fitch Ratings has affirmed Doha Bank's (DB) Long-Term Issuer Default Rating (IDR) at 'A' with a stable outlook.
“DB's IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch's expectation of an extremely high probability of support from the Qatari authorities for domestic banks in case of need.
This reflects the strong ability of Qatar to support its banks, as indicated by its rating (AA-/Stable), combined with Fitch's belief of a strong willingness to support the banking sector, including DB,” Doha Bank said on Wednesday.
Nevertheless, Fitch’s assessment of DB's standalone creditworthiness is underpinned by the well-established domestic franchise in Qatar of the fifth-largest bank, with market shares of about 6%-7% in loans and deposits at the end of first half 2019.
DB's NPL ratio improved slightly in the first nine months of this year, due mainly to QR537mn of write-offs, while loan growth (about 9%) was at the higher end of peers.
NPL origination (net new NPLs/average performing loans) also remains high (9M 2019: 1.7% annualised), although it has decreased from its peak (2018: 2.3%).
Total reserve coverage of impaired loans was 141% at the end of the third quarter in 2019.
However, specific coverage of Stage 2 loans was just 8%. Real-estate exposures are typically well covered with collateral, although collateral realization could be a lengthy process.
The bank's FCC ratio of 12% at the end of the third quarter was lower than most peers. It fell materially in 2018, due primarily to the impact of IFRS9 implementation but has since improved slightly. The improvement reflected the optimisation of RWAs - including growth in lower-risk weighted Qatari sovereign securities - and a lower dividend pay-out in 9M19. DB's high coverage of NPLs mitigates risks to capital from existing impaired loans.
Doha Bank chief executive officer Dr R Seetharaman said, “Fitch ratings recognised support of Qatari authorities for banking system in Qatar. The government has demonstrated a strong commitment to its banks and key public sector companies, which has been reaffirmed during past crisis.
“The reforms such as new investment law, real estate law, PPP Law, food security and tourism and Free trade zone development will contribute to Qatar’s non hydrocarbon segment.”