Fitch upgrades Ahli Bank QSC to 'A-'; Outlook Stable

Simultaneously, Fitch has affirmed ABQ's Short-term IDR at 'F2' and Individual rating at 'C'.

The rating upgrades reflect Fitch's view that there is now an extremely high probability that ABQ would receive financial support from the Qatari authorities, in case of need, given ABQ's increasing systemic importance to the Qatari banking system, and also the Qatari authorities' strong ability and propensity to maintain confidence in a relatively small banking system.

The affirmation of ABQ's Individual rating reflects the strengthening of the bank's franchise, performance and risk management processes following the acquisition of a 40% stake in ABQ by the Bahrain-based Ahli United Bank (rated 'A-' (A minus)/ Stable) in 2004. The Individual rating also recognises ABQ's very rapid loan growth in 2005-H108 (a feature of the Qatari market), declining but adequate capital ratios, concentrations in loans and deposits, and its reliance on a small and undiversified economy.

ABQ's operating profits rose a healthy 30% yoy in H108, benefiting from rapid loan growth, lower but sound margins, improving cost control and low loan impairment charges. Asset quality has improved significantly since 2004. Impaired loans were a low 1.4% of end-H108 gross loans, with adequate reserves coverage. However, Fitch believes impaired loans are likely to rise through the cycle and certain key segments that ABQ lends to, such as the local retail and property markets, have yet to be tested.

Liquidity and capitalisation have both weakened following rapid growth in risk-weighted assets in 2005-H108 but both remain adequate. The Fitch eligible capital ratio was 12% at end-H108. ABQ's funding is mainly from a locally sourced, concentrated customer deposits base.

Established in 1983, ABQ operates through 14 local branches, two of which are Islamic, and 31 ATMs. It had around 5.3% share of Qatari banking system assets at end-2007.