OREANDA-NEWS. Fitch Ratings has assigned Qatar-based International Bank of Qatar Q.S.C. (IBQ) 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
IBQ's IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch's expectation of support from the Qatari authorities, as for other Qatari banks, in case of need. Fitch's expectation of support from the authorities reflects Qatar's strong ability to provide support to its banks, as indicated by its 'AA' 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 for banks in Qatar generally, including recent years' measures to boost capital as well as asset purchases.

The government has demonstrated strong commitment to its banks and key public-sector companies and we expect this to continue despite the effects of lower oil prices. 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.

Fitch does not believe that franchise and/or level of government ownership or history of sovereign support for any given bank should necessarily lead to a difference in banks' SRFs in the case of Qatar. IBQ is privately held by members of the royal family of Qatar and unlike its peers in Qatar has no government ownership. It has not received extraordinary support from the state. However, Fitch expects that there is an extremely high probability that all rated Qatari banks that require support would receive it, irrespective of franchise, ownership and support history, and therefore has equalised IBQ's SRF and IDR at 'A+', in line with most other Fitch-rated Qatari banks.

KEY RATING DRIVERS - VR
All Qatari banks' Viability Ratings (VR) benefit from a stable and supportive operating environment, with the government's significant capital investment program driving rapid GDP growth and lending opportunities for domestic banks. High levels of investment and a rapidly expanding population (up by 9.5% year on year in March 2015) are driving strong economic growth. Real GDP growth was 6.2% in 2014, with the non-hydrocarbon sector rising by 11%, the quickest rate since 2009. Construction was the fastest growth sector, expanding by 18%, with finance and trade also growing by over 12%. Project momentum will remain strong, keeping non-hydrocarbon growth close to double digits, although limited capacity in the local private sector dampens the impact on the economy. The accompanying increase in the workforce will add to GDP growth.

IBQ is one of the oldest banks in Qatar and has a long-standing and limited but established franchise with specific focus on the domestic private banking market. This focus is especially evident on the funding side; on the asset side loans are mainly to domestic companies, both public sector and private. IBQ's VR reflects and is constrained by the bank's relatively small franchise, its concentrated funding and its high single-name lending concentrations, which increases the risk of fluctuation in asset quality. The VR also factors in the bank's solid capitalization, sound liquidity, good risk management and its consistent earnings.

Fitch believes the risks in the loan book are soundly managed. While concentration levels are high and above those of most peers, they are somewhat mitigated by the fact that the largest exposures are mainly to government related entities or else are well collateralised. Asset quality metrics and loan impairment charges are broadly in line with peers, and we expect the bank's concentrations to improve modestly as it implements its growth plans. Profitability ratios are sound and reflect a favourable business environment. Capital ratios compare well with peers, but Fitch considers a high level of capital to be necessary in view of the above-average loan book concentration. Fitch also expects capitalisation 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 most peers.

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

RATING SENSITIVITIES - VR
Stronger growth while maintaining risk standards and asset quality metrics should diversify the loan book and strengthen the bank's franchise. However, maintaining this balance could prove challenging and higher than expected growth, particularly in new or untested markets and/or a material deterioration of asset quality, could lead to downward pressure on the VR. Failure to maintain capital at a level sufficient to support growth and mitigate concentration risk could also lead to downward pressure on the rating.

In addition, an increase in the bank's risk appetite, which could be evidenced by a change in strategy or in its underwriting standards, could pressure the VR.

The rating actions are as follows:

Long-term IDR assigned at 'A+'; Outlook Stable
Short-term IDR assigned at 'F1'
Viability Rating assigned at 'bb+'
Support Rating assigned at '1'
Support Rating Floor assigned at 'A+'.