- Moodys Investors Service has upgraded Qatar International Islamic Banks ratings
- Change is due to improved asset quality performance and high levels of government support
- QIIBs assets have grown an average of 21 per cent a year since 2010
US-based ratings agency Moodys Investors Service has upgraded Qatar International Islamic Banks (QIIBs) issuer rating to a A2/Prime-1 with a stable outlook.
Its baseline credit assessment (BCA) was also upgraded to ba1 and the counterparty risk assessment to A1.
These positive changes are due to QIIBs improved asset quality performance. Its non-performing loan ratio, or the proportion of loans unlikely to be repaid, has fallen to just 1 per cent.
The stable outlook is based on the continued infrastructure spend in Qatar, which is driving asset growth, despite lower oil prices.
Moodys expects the Qatari government to offer a high level of support to the bank.
QIIB has diversified its balance sheet. Retail now makes up 28 per cent of financing while governmental lending constitutes 13 per cent. Its Islamic retail sector has also grown. However, the concentration of its assets in the real estate sector, 38 per cent of its portfolio, represents a risk.
QIIBs assets have grown an average of 21 per cent a year between 2010 and 2014, but it retains a capitalisation ratio of about 20 per cent, higher than comparable banks.
QIIB had total assets of QR37bn ($10bn) at the end of March 2015. Its profits rose 4 per cent to QR212m in the first quarter of 2015.
Moodys also assigned long- and short-term local and foreign currency deposit ratings of A3/Prime-2 to the local Al-Khalij Commercial Bank. Its BCA rating is ba1, both with a stable outlook.
Al-Khalij also has improving asset quality, despite the risk of its concentration in one sector. Its capitalisation levels are declining due to rapid growth, at an average of 32 per cent a year, and relatively weak profitability.