Stable, low-risk rating from S&P
Standard & Poor’s (S&P;) has classified the banking sector of Qatar (AA/Stable/A-1+) in group ‘4’ (the fourth-lowest risk category on a 1-10 scale) under its Banking Industry Country Risk Assessment (BICRA) criteria.
S&P’s BICRA uses economic risk and industry risk scores to determine a bank’s anchor, the starting point in assigning an issuer credit rating to a bank. Commenting on the rating rationale on the economic risk assessment for Qatar, which has cited economic imbalances as high risk, Stéphanie Méry, director of financial services, S&P, said that the company expected moderate acceleration in lending growth after the slowdown in 2013. “We consider Qatar’s economy to be in an expansionary phase owing to its prosperity. Real gross domestic product growth was six percent in 2013, and the banking sector is expanding rapidly. Credit growth was exceptionally strong up to 2011 and 2012, when it rose 30 percent and 21 percent, respectively.”
Méry added, “We note that acquisitions made by Qatar National Bank (QNB) and The Commercial Bank of Qatar (CBQ) in 2013 slightly distorted the figures and helped fuel Qatar’s total loan growth of 13 percent including foreign and domestic lending significantly during this period.”
In response to The Edge’s question on the local banks’ performance after the Basel III comes into effect, Méry said that the Qatar Central Bank issued its final Basel III liquidity coverage ratio, with a minimum requirement of 60 percent as of January 2014, rising in equal annual steps of 10 percent to reach 100 percent on January 1, 2019. “We don’t think the Qatari banking industry will face major capitalisation or liquidity issues when dealing with the introduction of new Basel III capital rules,” she added.