OREANDA-NEWS. Fitch Ratings has assigned Qatar-based Barwa Bank Q.S.C. (Barwa) a Long-term Issuer Default Rating (IDR) of 'A+' with a Stable Outlook and Short-term IDR of 'F1'. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS - IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR
Barwa's IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch's expectation of support from the Qatari authorities for domestic banks in case of need. Fitch's expectation of support from the authorities reflects Qatar's strong ability to provide support to Barwa, as indicated by its rating, combined with Fitch's belief that there would be a strong willingness to do so. The latter is based on a history of sovereign support including recent years' measures to boost capital as well as asset purchases. Additional supportive actions taken by the Qatari authorities included direct asset purchases (both loans and equities) in 2009. The sovereign's capacity to support the banking system is sustained by its sovereign wealth funds and on-going revenues, mostly from its hydrocarbon production.

RATING SENSITIVITIES - IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR
The IDRs, SR and SRF are sensitive to a change in Fitch's assumptions around the Qatari authorities' propensity or ability to provide timely support to Barwa. At present Fitch considers the likelihood of any change to be small.

KEY RATING DRIVERS - VRs
All Qatari banks' VRs benefit from a stable and supportive operating environment, with the government's significant capital investment program driving rapid GDP growth and creating lending opportunities for domestic banks.

The main drivers of Barwa's VR are the company's profile and its risk appetite. The former benefits from the bank's solid ties to the Qatari government, as a result of the 54% ownership stake held by various government entities, which helps to generate a significant flow of government business, both on the financing and the funding side. Despite the bank's focus on the Qatar government and government related entities for growth, its risk appetite is constrained by the bank's still small size and franchise and the consequent concentration on both sides of the balance sheet. Fitch notes that while concentration levels are above those of most peers, they are somewhat mitigated by the fact that concentrations are largely to government related business. We expect the bank's franchise to strengthen and concentrations to lessen as it continues its growth.

Barwa's strong ability to generate profits also supports the VR, and we expect profitability to improve. Asset quality is sound and the cost of risk is low. Capital ratios are currently among the best in the sector; and help mitigate the higher than average concentrations. Fitch expects capital ratios to weaken with the bank's asset growth, but to remain sound. Liquidity is sound but funding is very highly concentrated, more so than for peers, although Barwa is reducing concentration and focuses on improving its asset / liability matching.

RATING SENSITIVITIES - VRs
Continued growth while maintaining prudent risk standards and sound asset quality should diversify the loan book and strengthen the bank's franchise and could lead to an upgrade of the VR.

A material deterioration of asset quality could lead to downward pressure on the VR. In addition as indicated above, Fitch expects capitalization to weaken somewhat but if capital levels were not maintained at a level sufficient to support stated growth plans and adequately mitigate concentration and other risks, this could lead to downward pressure on the ratings.

The rating actions are as follows:

Barwa Bank Q.S.C.

Long-Term IDR assigned at 'A+'
Short-Term IDR assigned at 'F1'
Viability Rating assigned at 'bbb-'
Support Rating assigned at '1'
Support Rating Floor assigned at 'A+'.