Standard & Poor's ranks the Qatari banking system in Group 5 of its global Banking Industry Country Risk Assessment (BICRA).
"This classification reflects the system's stellar financial performance, solid capitalization, and ample liquidity," said Standard & Poor's credit analyst Mohamed Damak. These positive factors are partially counterbalanced by the narrowness of the country's economy, and the system's increasing vulnerability to a real estate sector shock--exacerbated by the rapid and untested credit expansion.
Standard & Poor's assessment of the banking system in the State of Qatar (AA-/Stable/A-1+) takes into account the authorities' interventionist approach toward the system and the high likelihood of support of systemically important banks in case of need. Thus, all ratings on Qatari banks are uplifted from their stand-alone creditworthiness.
"Qatari banks have been quickly building up untested consumer and real estate loans over the past three years, increasing their vulnerability to an economic downturn or a real estate sector correction," said Mr. Damak.
On a positive note, the outlook for the Qatari economy is bright even though the country's performance and revenues continue to depend heavily on the oil and gas sector. Over the past 12 months, Qatar banks' financial performance has been supported by quickly increasing volumes, despite pressure on interest margins owing chiefly to mounting price competition.
Some leading players have started to diversify geographically to gain scale and reduce margin pressure. Supportive shareholders with ready capital are a strong mitigating factor to the risks of foreign expansion.
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Qatari banks are strong but exposed to a real estate shock and economic downturn, S&P says
- Qatar: Tuesday, April 22 - 2008 at 09:47
- PRESS RELEASE
Qatari banks are strong but exposed to a real estate shock and economic downturn, said Standard & Poor's Ratings Services in a report published today, "Bank Industry Risk Analysis: Qatar (State of)".
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Analyst contacts:Mohamed Damak, Paris
Emmanuel Volland, Paris
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Posted by Anne-Birte Stensgaard, Senior News EditorTuesday, April 22 - 2008 at 09:47 UAE local time (GMT+4)
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