Commercial Bank of Qatar outlook to positive on capital increase

"The outlook revision reflects CBQ's improved capitalization following a $900m capital increase concluded earlier this month, through a rights issue, Global Depositary Receipts, and a private placement,"

said Standard & Poor's credit analyst Mohamed Damak.

The ratings reflect CBQ's stellar financial performance, strong asset quality, and widening geographic diversification. Standard & Poor's considers CBQ to be a systemically important bank in the State of Qatar (AA-/Stable/A-1+), which we classify as interventionist toward its banking system. The long-term rating on CBQ is consequently one notch above the bank's stand-alone creditworthiness, integrating our expectation of the strong likelihood of government support in case of need. The ratings are constrained by concentration risks in a narrow domestic market, rapid loan growth untested by a sharp economic downturn, and the short track record of the bank's overseas expansion strategy.

The second-largest bank in Qatar, CBQ is a midsize player by regional standards, with assets totaling QAR53.8bn ($14.8bn) at midyear 2008.

"We expect that CBQ will continue to strengthen its customer franchise and maintain a solid financial performance,"

said Mr. Damak.

We would raise the ratings if CBQ delivers a longer track record of successful international operations through its existing affiliates, and reduces concentration risk while sustaining its strong financial performance, asset quality, and capitalization. The ratings or the outlook could come under downward pressure, however, if asset quality deteriorates significantly, financial performance declines, or unexpected risks at the bank's affiliates emerge.