Moody’s assigns A3 long-term rating to Masraf Al Rayan

MASRAF AL RAYAN: Moody's begins ratings coverage on Doha-headquartered Islamic lender. (Getty Images)

Moody's on Wednesday assigned A3 long-term and Prime-2 short-term local and foreign currency issuer ratings as well as a D+ bank financial strength rating (BFSR) to Masraf Al Rayan (MAR), with a stable rating outlook.

This is the ratings agency’s first public rating assigned to an Islamic bank in Qatar.

The agency noted that with $4.6 billion of assets at December 31 2008, MAR is a small financial institution by domestic and regional standards and holds a market share of around 5% in domestic banking assets.

But it added that MAR is one of Qatar's most successful Islamic banks and commands around 25% of the country's Shari'ah-compliant banking assets.

Despite its small size, the agency says MAR enjoys a solid brand name and a strong reputation as one of the most dynamic Shari'ah-compliant financial institutions in the country.

It added that the D+ BFSR - which maps to a baseline credit assessment (BCA) of Ba1 reflects MAR's growing franchise as one of Qatar's few Islamic banks, its close ties with the government of Qatar, strong financial performance and asset quality, as well as ample capitalisation and satisfactory liquidity.

It noted though that the rating is constrained by a short track record and limited absolute size, high degree of concentration risks, rapid balance sheet growth, as well as a still imbalanced funding continuum that is heavily reliant on short-term customer deposits, generating both maturity mismatches and displaced commercial risks.

''Moody's assesses the probability of systemic support in the event of a stress situation to be very high, based on Moody's assessment of Qatar (rated Aa2) as a high-support environment, especially for domestic, retail deposit-taking institutions like MAR.''
The outlook on the ratings is stable - Moody's considering both an upgrade and a downgrade of the bank's current BFSR and issuer ratings to be unlikely over the medium term.

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