(The following statement was released by the rating agency)Fitch Ratings-London-04 June 2020:Fitch Ratings has affirmed UAE-based Commercial Bank International's (CBI)Long-Term Issuer Default Rating (IDR) at 'BBB+' with a Stable Outlook andViability Rating (VR) at 'b+'. A full list of rating actions is at the end ofthis commentary.Key Rating DriversIDRs, SUPPORT RATING (SR) AND SUPPORT RATING FLOOR (SRF)

CBI's IDRs, SR and SRF reflect a high probability of support available to thebank from the UAE authorities if needed.

Fitch's view of support factors in the sovereign's strong ability to supportthe banking system, sustained by sovereign wealth funds and recurring revenue,mostly from hydrocarbon production, despite lower oil prices. Fitch alsoexpects a high willingness from the authorities to support the banking sector,which has been demonstrated by the UAE authorities' long track record ofsupporting domestic banks, and is also underlined by partial governmentownership of some banks.

CBI's SRF is two notches below the UAE Domestic Systemically Important Banks'(D-SIB) SRF of 'A', reflecting Fitch's view that CBI is of moderate systemicimportance based on its less than 1% market share of total assets in the UAEbanking sector at end-2019.

We assign Short-Term IDRs according to the mapping correspondence described inour rating criteria. A 'BBB+' Long-Term IDR can correspond to a Short-Term IDRof either 'F2' or 'F1'. In the case of CBI, we opted for 'F2', the lower ofthe two Short-Term IDR options. This is because a significant proportion ofUAE banking sector funding is related to the government and a stress scenariofor banks is likely to come at a time when the sovereign itself isexperiencing some form of stress. Fitch judges this "wrong-way" risk to behigh in the UAE, and this is reflected in the Short-Term IDR, which primarilyreflects CBI's liquidity and funding profile.


CBI's VR reflects the bank's weak franchise (market share below 1%), a lessdiversified business model than peers, weak and volatile asset qualitymetrics, low and highly vulnerable capital ratios in light of the bank'sconcentrated balance sheet, elevated capital encumbrance and weakprofitability metrics.

The VR also takes into account acceptable management and strategy, adequateliquidity and the ordinary support, including liquidity support, the bankenjoys from its largest shareholder Qatar National Bank (QNB; A+/Stable/F1;40% stake).

CBI has a small franchise and market share in the UAE, accounting for about0.6% of total banking system assets and deposits at end-2019. The bank'sbusiness model remains concentrated, with a higher exposure than domesticpeers to the trade and services sectors.

Prior to the regional tensions, QNB's shareholding in CBI allowed the twobanks to participate together in syndicated transactions, providing CBI with acompetitive advantage compared with other UAE small banks. However, thesebenefits have now diminished.

CBI's loan book is characterised by high single-obligor and sectorconcentrations, with the top 20 funded exposures representing 3x the bank'scommon equity Tier 1 (CET1) at end-2019, well above domestic peers andexposing the bank to event risk. CBI also has high exposure to sectors thatare vulnerable in the current economic environment, with trade, business andinvestment, services and real estate and construction making up 70% of thebank's loan book at end-2019. This is compounded by high exposures toproblematic exposures, especially New Medical Center (NMC) and relatedcompanies, amounting to 24% of the bank's CET1 capital at end-2019.

Despite high levels of write-offs, CBI's asset quality metrics weakened in2019, with the stage 3 loans ratio rising to 12.7% from 9.4% at end-2018,driven by higher stage 3 inflows in the service and construction sectors.CBI's concentrated underwriting profile heightens the volatility of the bank'sasset quality metrics, with the top 20 stage 3 exposures representing about90% of total stage 3 financing. CBI's reserve coverage of stage 3 financingremained weak at 51% at end-2019 and was one of the lowest among domesticpeers.

Stage 2 loans accounted for a further 16.2% of gross loans, giving a problemloans ratio (stage 2 + stage 3 loans) of 29% at end-2019 and heightening thevulnerability of the stage 3 ratio to migration of stage 2 loans. Loan losscoverage of problem loans was low at 23% at end-2019, leaving the bank'sfinancial performance highly vulnerable to asset quality developments.Considering the bank's problematic exposures and the weaker economic andbusiness environment driven by the COVID-19 outbreak and lower oil prices, weexpect the bank's problem loans ratio to increase in 2020-2021.

Measures announced in March 2020 by the Central Bank of the United ArabEmirates (CBUAE) allowing a broad range of customers to defer their loanservicing commitments and where necessary to restructure loans will slowimpaired loans recognition in the near term. However, borrowers' ability torecover and maintain or resume debt servicing payments will depend to a largeextent on the duration of lockdown measures in the UAE, travel restrictionsand global economic trends.

Earnings and profitability metrics have remained variable and are much weakerthan domestic peers, given high vulnerability to loan impairment charges(LICs) and weaker operating efficiency. Fitch's key earnings and profitabilitymetric - operating profit/risk-weighted assets (RWAs) - demonstrates thevariability of the bank's operating profitability, ranging from -2.9% to 1.5%over the last five years. Subdued business conditions and low loan growth as aresult of COVID-19 economic-related disruptions will pressure earningsgeneration in 2020-2021. LICs are expected to increase in line with expecteddeterioration in the bank's loan quality metrics and this will be aggravatedby the bank's already weak reserve coverage of stage 3 loans.

In line with the bank's transformation plan, CBI has been executing well inscaling back its operating expenses through the rationalisation of thedistribution network and headcount reductions, as reflected in the reductionin the Fitch-calculated cost-to-income ratio to 48% in 2019 from 54% in 2016.However, we do not expect the ratio to continue declining given the revenuepressures caused by a less supportive economic environment.

We view CBI's capital ratios as weaker than at other Fitch-rated UAE peers,with a CET1 ratio of only 11.3% at end-2019. The ratio improved in 2019,supported by deleveraging despite low internal capital generation. The bank'stotal capital adequacy ratio stood at 15.4% at end-2019, providing comfortablebuffers over minimum regulatory requirements. We believe regulatoryforbearance allowing banks to partially add back increases in stage 1 andstage 2 IFRS 9 expected credit loss provisions to regulatory capital willprovide some support to CBI's regulatory capital buffers and partially offsetthe expected deterioration in asset quality and profitability metrics.

However, CBI's low core capital buffers are highly vulnerable, given thebank's concentrated underwriting, weak underlying asset quality and the highlevel of unreserved stage 3 loans (45% of CET1 capital at end-2019),underpinning the bank's weak loss-absorption capacity. We expect the bank'score capital buffers to remain weak over our rating horizon, given the absenceof planned core capital issuance and expected lower internal capitalgeneration.

CBI is largely funded by stable customer deposits, which accounted for about85% of total non-equity funding at end-2019. Customer deposits are 46%corporate-related, which have historically been stable, while retail depositsaccounted for a further 33% at end-2019. Single-depositor concentration ishigh, with the 20-largest deposits accounting for 44% of the total atend-2019. CBI complements its deposit funding with interbank funding andperpetual additional Tier 1 securities, demonstrating reasonable access tocapital markets as well as ordinary parental support from QNB.

We view CBI's liquidity profile as adequate and comparing well with peers.However, the loans-to-deposits ratio rose to 104% at end-2019 from 88% atend-2018 on the back of the bank's strategy to shed expensive term deposits.CBI maintains a reasonable cushion of net liquid assets (cash and cashequivalents, net short-term interbank placements and liquid securities), whichrepresented 11% of total assets and covered 18% of customer deposits atend-2019.RATING SENSITIVITIESIDRS, SR, SRF

CBI's IDRs, SR and SRF are sensitive to a change in Fitch's view of thecreditworthiness of the UAE authorities and on their propensity to support thebanking system or the bank.

Factors that could, individually or collectively, lead to negative ratingaction/downgrade:

Deterioration in our view of the creditworthiness of the UAE authorities ortheir propensity to support the banking system or the bank could lead to adowngrade of the bank's IDRs.

Factors that could, individually or collectively, lead to positive ratingaction/upgrade:

Given our existing view of the high creditworthiness of the UAE and highpropensity to support the banking system and the bank, positive rating actionon the bank's Long-Term IDR is unlikely. However, a significantly highermarket share could be positive for the ratings if this strengthens our view ofthe bank's systemic importance in the UAE.


Factors that could, individually or collectively, lead to negative ratingaction/downgrade:

Pressure on CBI's VR could result from further deterioration in asset quality,especially increasing stage 2 and stage 3 loans as a share of gross loansaffecting the bank's profitability and leading to an erosion of the bank'score capital ratios and increasing capital encumbrance.

Factors that could, individually or collectively, lead to positive ratingaction/upgrade:

Sustained improvement in the bank's asset quality and profitability leading tomuch lower capital encumbrance and/or an expansion in the bank's domesticfranchise could lead to an upgrade of the VR but this is unlikely in the shortterm.Best/Worst Case Rating ScenarioInternational scale credit ratings of Financial Institutions issuers have abest-case rating upgrade scenario (defined as the 99th percentile of ratingtransitions, measured in a positive direction) of three notches over athree-year rating horizon; and a worst-case rating downgrade scenario (definedas the 99th percentile of rating transitions, measured in a negativedirection) of four notches over three years. The complete span of best- andworst-case scenario credit ratings for all rating categories ranges from 'AAA'to 'D'. Best- and worst-case scenario credit ratings are based on historicalperformance. For more information about the methodology used to determinesector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING Theprincipal sources of information used in the analysis are described in theApplicable Criteria.Public Ratings with Credit Linkage to other ratingsCBI's IDRs, SR and SRF reflect a high probability of support available to thebank from the UAE authorities if needed.ESG Considerations The highest level of ESG credit relevance, if present, is ascore of 3. This means ESG issues are credit-neutral or have only a minimalcredit impact on the entity(ies), either due to their nature or to the way inwhich they are being managed by the entity(ies). For more information onFitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

Commercial Bank International P.S.C.; Long Term Issuer Default Rating;Affirmed; BBB+; RO:Sta; Short Term Issuer Default Rating; Affirmed; F2; Viability Rating; Affirmed; b+; Support Rating; Affirmed; 2; Support Rating Floor; Affirmed; BBB+

Contacts:Primary Rating AnalystHuseyin Sevinc,Director+44 20 3530 1027Fitch Ratings Ltd30 North Colonnade, Canary WharfLondon E14 5GN

Secondary Rating AnalystAurelien Mourgues,Director+44 20 3530 1855

Committee ChairpersonJames Watson,Managing Director+7 495 956 6657

Media Relations: Louisa Williams, London, Tel: +44 20 3530 2452, Email:louisa.williams@thefitchgroup.com

Additional information is available on www.fitchratings.com

Applicable CriteriaBank Rating Criteria (pub. 28 Feb 2020) (including rating assumptionsensitivity) ( https://www.fitchratings.com/site/re/10110041 )

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