Doha – Mubasher: Standard and Poor’s (S&P) on Sunday announced downgrading its long-term outlook for Qatar National Bank (QNB) to "A" from "A+".
The global ratings agency attributed the downgrade to Qatar’s sovereign credit outlook, which was also lowered to “AA-“ from “AA” on Wednesday, after some Arab and Gulf countries broke their diplomatic ties with Qatar.
S&P put QNB, the Commercial Bank of Qatar (CBQ), Doha Bank, and Qatar Islamic Bank (QIB) on the CreditWatch list with "negative" implications. This means that S&P is likely to downgrade their ratings again.
If the situation continues without any change, it will impact Qatar’s sovereign credit and increase its foreign debt which will lead to draining foreign reserves quickly.
Qatari banks depend on external finance by 35%.
“We believe the recent developments might result in an outflow of external funding for Qatari banks over the next few months, depending on how the situation evolves,” said S&P Global Ratings credit analyst Mohammad Damak.
On Monday, the first day of the diplomatic rift, Qatar's sovereign US dollar bonds declined by 1.8 cents to 99 cents per dollar, recording the lowest level since March 2017.
Similarly, the Qatari currency fell to QAR 3.647 against the dollar in the spot market, registering its lowest level in a year.
Although Qatari banks’ current strong liquidity profiles should help them absorb a moderate drop in external funding, many banks could suffer funding challenges on the long-run.
By the end of April 2017, Qatari banks’ net external debt reached a combined $50 billion.
