Fitch Affirms Barwa Bank at 'A+'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed Barwa Bank Q.S.C.'s (Barwa) Long-term Issuer Default Rating (IDR) at 'A+' with Stable Outlook. Fitch has also affirmed Barwa's Viability Rating (VR) at 'bbb-'. A full list of rating actions is attached at the end of this rating action commentary.
KEY RATING DRIVERS
IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR
Barwa's IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch's expectation of support from the Qatari authorities for domestic banks in case of need. Fitch's expectation of support from the authorities reflects Qatar's strong ability to provide support to its banks, as indicated by its rating (AA/Stable), combined with Fitch's belief that there will be a strong willingness to do so. The latter is based on a history of sovereign support.
The government has demonstrated strong commitment to its banks and key public-sector companies and we expect this to continue despite the effects of lower oil prices. The government owns stakes in Qatari banks following capital injections into the banking system between 2009 and 1Q11. The sovereign's capacity to support the banking system is sustained by its sovereign wealth funds and on-going revenues, mostly from its hydrocarbon production.
The Stable Outlook reflects the Outlook on the Qatari sovereign.
The VR reflects the small size and franchise of Barwa, but also the benefits of its solid ties to the Qatari government, as a result of the 54% ownership stake held by various government entities, which helps to generate business flows, in both financing and funding. The VR also takes into account sound asset quality and reasonably strong profitability, but also high lending concentrations. While Barwa's capital ratios are solid this should be viewed against the bank's concentrated balance sheet. The VR takes into account tightening liquidity and a funding base that is also highly concentrated, and more so than that of peers.
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR
The IDRs, SR and SRF are sensitive to a change in Fitch's assumptions around the Qatari authorities' propensity or ability to provide timely support to the banking sector. At present Fitch considers the likelihood of such change to be small.
Downside to Barwa's VR could arise from a significant weakening of liquidity if loan growth is not matched by an increase in liquid assets, or from a material deterioration of asset quality. Downward pressure could also arise from capital levels not being sufficient to support stated growth plans and adequately mitigating concentration and other risks.
KEY RATING DRIVERS AND SENSITIVITIES: SPV AND SENIOR DEBT
The ratings of the debt issued by the BBG Sukuk Ltd, listed below, are in line with Barwa's Long- and Short-term IDRs and are sensitive to changes in Barwa's IDRs.
The rating actions are as follows:
Barwa Bank Q.S.C.
Long-Term IDR affirmed at 'A+', Outlook Stable
Short-Term IDR affirmed at 'F1'
Viability Rating affirmed at 'bbb-'
Support Rating affirmed at '1'
Support Rating Floor affirmed at 'A+'
BBG SUKUK LTD
EMTN programme senior unsecured notes affirmed at 'A+'/ 'F1'
Senior unsecured notes: affirmed at 'A+'
(See "Fitch Rates BBG Sukuk Ltd's Trust Certificate Issuance Programme 'A+'" dated 4 December 2015)