Credit rating agencies Moody's and Fitch Ratings have placed National Bank of Oman's (NBO) ratings on review for upgrade. The rating agencies' decision comes ahead of the completion of The Commercial Bank of Qatar's (CBQ) acquisition of an additional stake in NBO.
Moody's placed on review for upgrade NBO's ba3 adjusted baseline credit assessment, Ba3 long-term deposit ratings, Ba3 senior unsecured ratings, Ba2 long-term local currency counterparty risk ratings and Ba2(cr) long-term counterparty risk assessment.
At the same time, Moody's affirmed NBO's ba3 baseline credit assessment, Ba2 long-term foreign currency counterparty risk ratings and all its short-term ratings and assessments at NP and NP(cr).
On the other hand, Moody's affirmed CBQ's bank deposit ratings at A3/Prime-2 and maintained the stable outlook on the long-term ratings.
The review for upgrade on NBO's long-term ratings and adjusted baseline credit assessment reflects CBQ's recent purchase offer to the other shareholders of NBO to acquire an additional 15.2 per cent stake, which would increase its shareholding in NBO to 50.1 per cent, Moody's said in a statement.
The CBQ's offer period to the shareholders of NBO opened on June 10 and will close on July 11.
Moody's estimates that following a potential consolidation of NBO, CBQ's exposure to Oman will account for approximately 18 per cent of assets, based on year-end 2020 figures.
Following the increase in shareholding, CBQ will consolidate NBO as a subsidiary. 'This would lead to an increase in our assumption of affiliate support to High, and exert positive pressure on the bank's adjusted baseline credit assessment, given CBQ's management control of NBO, combined with the strategic fit and brand name association of NBO with CBQ Group,' Moody's said.
Should the review conclude with an upgrade, NBO's ratings would likely be placed on negative outlook to reflect the negative outlook on Oman's sovereign rating, Moody's noted.
Fitch Ratings on Tuesday too affirmed CBQ's long-term issuer default rating at 'A' with a stable outlook, and placed NBO's 'BB-' long-term issuer default rating and '4' support rating on 'rating watch positive'.
The rating watch positive reflects Fitch's belief that as a result of the planned acquisition of a controlling stake in NBO by CBQ, this would strengthen CBQ's propensity to support NBO, should this be required.
'CBQ has stated - on gaining majority control - its intention to provide capital to NBO as and when needed for planned growth initiatives and to meet minimum regulatory requirements. We would expect synergies and integration between the two banks to grow over time,' Fitch noted in a statement.
Fitch noted that the 'rating watch positive' will be resolved once the offer to NBO shareholders has been agreed and completed, and CBQ's stake increases, in line with current plans. Fitch's base-case expectation is that NBO's long-term issuer default rating would be upgraded to 'BB' with a negative outlook and the support rating to '3' from '4'.
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