Fitch affirms Qatar National Bank at IDR 'A+'; outlook stable

The Support Rating Floor is affirmed at 'A+'. The Outlook for the Long-term IDR is Stable.

QNB's Long and Short-term IDRs and Support rating reflect Fitch's view of an extremely high probability of support from the Qatari authorities, if ever required. This view is based on QNB's systemic importance as the largest Qatari bank, its key role as the primary banker to the State as well as the Qatari government's 50% shareholding.

The Individual rating considers QNB's strong commercial franchise, close links to the government and track record of strong financial performance. These factors are counterbalanced by the bank's reliance on the Qatari economy and large concentrations in loans and deposits.

QNB's performance remains strong under the very buoyant economic and operating conditions in Qatar. The bank reported a 30% rise in net income to QAR2bn in 2006 on robust core operating revenues derived from rising corporate and retail credit volumes.

Income growth also benefited from further involvement in large project finance transactions, international expansion and the first year positive contribution from QNB's Islamic finance business. The bank also saw large realised gains on investments and other sources of non-recurring income, although H107 figures show these to be declining in importance. Asset quality is sound and liquidity remains comfortable. The implementation of Basel II in January 2006 resulted in a small reduction in the total capital adequacy ratio to 16.7% at end-2006. The Fitch eligible capital ratio declined to 17.4% on fast asset growth, but remains acceptable.

Established in 1964, QNB is Qatar's largest bank with a 43% market share in assets. The bank is 50%-owned by the state and the remaining shares are widely held. The bank has close links to the state and enjoys a larger share of state-related business than its peers. QNB's local franchise is supported by a network of 48 conventional and Islamic branches, a call centre and internet banking. The bank is now focused on expanding its domestic retail business while extending its operations in the MENA region.