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Fitch Places Commercial Bank International on Rating Watch Negative
June 21, 2017 / 3:31 PM / 4 months ago

Fitch Places Commercial Bank International on Rating Watch Negative

(The following statement was released by the rating agency) LONDON, June 21 (Fitch) Fitch Ratings has placed UAE-based Commercial Bank International's (CBI) Issuer Default Ratings (IDRs) on Rating Watch Negative (RWN). This action follows the placement of CBI's 40% shareholder, Qatar National Bank (QNB) on RWN (see 'Fitch Places Nine Qatari Banks on Rating Watch Negative' dated 21 June 2017 at www.fitchratings.com) to reflect the significant uncertainty for the Qatari banking system resulting from the decision of Saudi Arabia, the UAE, Bahrain, Egypt and some other Arab countries to sever diplomatic and logistical ties with Qatar. While some discussions have taken place to resolve the crisis, it is becoming more likely that the crisis will be sustained and will negatively impact Qatar's economy. Ultimately, the Qatari sovereign ability to support QNB could weaken and its IDR, which is driven by potential sovereign support, could be downgraded. This in turn could impact QNB's ability to provide support to CBI. CBI's Viability Rating (VR) of 'b+' is unaffected. KEY RATING DRIVERS IDRs AND SUPPORT RATING CBI's IDRs and SR are driven by institutional support from QNB (AA-/RWN/F1). Fitch views CBI as a key affiliate of QNB and CBI is QNB's only presence in the UAE, which is considered an important market for the Qatari Group. The ratings also reflect our belief that any required support would be easily manageable for QNB given the small size of CBI in relation to QNB. However, our view of potential support is somewhat constrained by QNB's minority 40% stake in CBI, which is the maximum allowed under UAE law for foreign ownership. QNB's IDRs are based on potential support available from the Qatari authorities, if necessary. In Fitch's view, this support would flow through QNB to CBI given the role it plays for QNB. A downgrade of QNB's IDRs would trigger a downgrade of CBI's IDR. When assessing CBI's IDRs, Fitch takes the viewthat the Qatari authorities will not place a moratorium on support towards banking subsidiaries in countries in dispute in retaliation. VR CBI's VR primarily reflects the bank's limited franchise, less diversified business model than peers, weak but improving asset quality metrics and weak capital ratios in light of the bank's high loan growth strategy. The VR also takes into account the clean-up of CBI's balance sheet through the write-off of legacy impaired loans, tightened underwriting standards, albeit with a still limited track record, and the intrinsic ordinary support, including liquidity support, the bank enjoys from QNB. RATING SENSITIVITIES IDRS AND SUPPORT RATING CBI's IDRs and SR are sensitive to a change in QNB's IDRs or a change in Fitch's view of CBI's strategic importance to its parent. In turn, QNB's IDRs are sensitive to a change in the Qatari authorities' ability or propensity to provide support if needed. In the very unlikely event that the Qatari authorities place a moratorium on support towards banking subsidiaries in countries in dispute in retaliation, extraordinary support from QNB would be discounted; CBI's IDR would then be driven by its VR and could be downgraded. VR Further evidence of CBI implementing its strategy, building its franchise and growing its balance sheet with no material deterioration in the bank's risk indicators could contribute to an upgrade. Upside for the VR could also arise from improvements in the underlying asset quality and capital ratios. In the very unlikely event that the Qatari authorities place a moratorium on support towards banking subsidiaries in countries in dispute in retaliation, ordinary support from QNB would be discounted and CBI's VR could be downgraded. The rating actions are as follows: Commercial Bank International Long-Term IDR of 'A-'; placed on Rating Watch Negative Short-Term IDR of 'F1'; placed on Rating Watch Negative Viability Rating unaffected at 'b+' Support Rating of '1'; placed on Rating Watch Negative Contact: Primary Analyst Redmond Ramsdale Senior Director +44 20 3530 1836 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Mark Cordwell Analyst +44 20 3530 1644 Committee Chairperson Eric Dupont Senior Director +33 1 44 29 9131 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. 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