Doha: Moody’s Investors Service (Moody’s) yesterday upgraded the long-term bank deposit ratings of Al Khalij Commercial Bank (al khaliji) to A1 from A3. The ratings were placed on review for possible upgrade on April 28, 2021.
At the same time, Moody’s has affirmed the Baseline Credit Assessment (BCA) and Adjusted BCA of the Bank at ba1. The outlook on al khaliji’s deposit ratings is stable. Subsequent to the action, Moody’s also said that it will withdraw the ratings of the Bank.
Yesterday’s rating action follows the completion of the merger between Masraf Al Rayan (Masraf, issuer rating: A1 stable, BCA: baa2) and al khaliji on November 30, 2021, where Masraf was the surviving entity absorbing all the assets and liabilities of al khaliji, which ceased to exist.
al khaliji was one of the smaller banks in Qatar with total assets of QR58.5bn ($16.1bn) as of September 2021. Masraf was the fourth-largest bank with total assets of QR124.8bn ($34.3bn) as of September 2021. Moody’s estimates that the combined entity will be the third-largest bank in Qatar, with market share in assets of 10 percent as of year-end 2020.
Moody’s affirmation of al khaliji’s ba1 BCA reflects the rating agency’s view that the Bank’s operations and standalone profile remain well positioned at the current level, and have not changed significantly since the merger announcement. The BCA is supported by: Qatar’s benign operating conditions which supports the bank’s good asset quality; solid capitalization; and strong liquidity. At the same time, these strengths are moderated by the Bank’s high reliance on market funding, and high borrower and sector concentrations.
Moody’s added that al khaliji’s long-term deposit ratings were upgraded to A1 from A3, aligned with Masraf’s issuer ratings, to reflect the transfer of all assets and liabilities to Masraf from the effective merger date. The upgraded A1 deposit ratings incorporate six notches of uplift from the Bank’s ba1 BCA. This reflects Moody’s assessment of a very high likelihood of government support in case of need, similarly to Masraf.
Following the completion of the merger all liabilities of al khaliji have been assumed by Masraf and the BCA and the deposit ratings assigned to al khaliji will be withdrawn.
Moody’s added that the stable outlook on al khaliji’s ratings balances its good asset quality, solid capital and liquidity buffers against its relatively weak profitability and high reliance on market funding. The stable outlook also takes into account the stable outlook on the Qatari government’s rating, Moody’s said.
