Political tensions credit negative for Qatari banks: Moody’s

CAIRO – 8 June 2017: The diplomatic rift between Qatar and Gulf Cooperation Council (GCC) countries and non-member Egypt would be credit negative for Qatari banks, Moody’s said Thursday.

As Qatari banks depend by 35 percent foreign funding for liabilities, Moody’s said in its weekly report that funding costs for Qatari banks would increase for debt securities, with risks imposed for withdrawals from non-resident deposits and interbank facilities.

The increased reliance on foreign funding, which went up from 23 percent in 2014, occurred as a result of the international decline in oil prices, it explained.

Any further restrictions on Qatar could cause liquidity squeeze and be negative for other economies in the region, investors’ confidence and credit growth opportunities for GCC banks, according to the report.

“We expect the Qatari government to support the banks if needed, as it did during the 2009-2010 financial crisis to maintain investor/depositor confidence and financial stability when both equity and property prices were declining,” Moody’s said.

On uncertainties for growth, Moody’s downgraded ratings of oil and gas, industry and real estate firms in Qatar on 31 May from AA3 to AA2.

Moody’s said it could consider this rating later on if the companies proved strong financial performance and expanded outside Qatar.