S&P revises outlook on Qatar's second largest bank

RATINGS REVISED: S&P has changed its outlook on the Commercial Bank of Qatar.

Standard & Poor's has revised its outlook on the Commercial Bank of Qatar (CBQ) to stable from positive reflecting a tougher operating environment.

The ratings agency also affirmed the bank's A-/A-2 ratings.

"With the outlook revision, we are indicating a reduced likelihood of an upgrade in the short to medium term," said Standard & Poor's credit analyst Mohamed Damak.

The ratings on CBQ reflect the bank's good commercial position and satisfactory financial profile, Damak added.

The ratings are constrained by the bank's less supportive operating environment, narrow domestic market with high concentration risks, and rapid loan growth.

Standard & Poor's considers CBQ to be a systemically important bank in Qatar, reflecting its expectation of a high likelihood of support in case of need.

The second-largest bank in Qatar, CBQ is a midsize player by regional standards, with assets totaling QR61.2 billion ($16.8 billion) at year-end 2008.

The bank acquired a 40 percent stake in Sharjah-based United Arab Bank in 2007 and previously bought a 34.8 percent stake in National Bank of Oman.

Standard & Poor's said that while these purchases have improved CBQ's geographic diversification, the risk profile of these institutions is higher than that of CBQ's domestic core businesses.

Damak added: "We would lower the ratings if the bank's liquidity, profitability, or asset quality deteriorate more rapidly than we now expect or if the credit profile of the bank's associates weakens dramatically.

"We see limited room for a positive rating action in the foreseeable future. In the longer term, we could raise the ratings if CBQ strengthens its financial profile, reduces concentration risk, and demonstrates its ability to control risks at its associates."

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