Fitch Ratings has assigned
The Recovery Rating is 'RR5'. The size of the issue is not yet determined but is expected to be in the range of
The final rating is subject to the receipt of the final documentation conforming to information already received by Fitch.
The notes qualify as Basel III-compliant Tier 2 instruments and contain contractual loss absorption features, which can be triggered at the point of non-viability. According to the draft terms, the notes are subject to permanent partial or full write-down, on the occurrence of a non-viability event (NVE). There are no equity conversion provisions in the terms.
An NVE is determined as occurring once the bank has incurred losses and has become, or is likely to become, non-viable as determined by the local regulator, the
The notes have an expected 10-year maturity and a call option after five years.
Key Rating Drivers
The notes are rated one notch below QNBF's Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) of 'B-', in accordance with Fitch's Bank Rating Criteria.
The one notch for loss severity reflects Fitch's view of below-average recovery prospects for the notes in an NVE. The one-notch loss severity, rather than our baseline two notches, reflects our view that shareholder support from
The anchor rating of QNBF's LTFC IDR reflects our view that
QNBF's LTFC IDR is driven by shareholder support from
Fitch has applied zero notches for incremental non-performance risk, as the agency believes that write-down of the notes will only occur once the point of non-viability is reached, there is no coupon flexibility prior to non-viability, and as the notes do not incorporate going-concern loss-absorption features.
The notes' 'RR5' Recovery Rating reflects below-average recovery prospects in default.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
As the notes are notched down from QNBF's shareholder support-driven LTFC IDR, their rating is sensitive to a downgrade of the IDR. The notes' rating is also sensitive to an unfavourable revision in Fitch's assessment of loss severity and incremental non-performance risk.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
The notes' rating is sensitive to an upgrade of QNBF's LTFC IDR.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
QNBF's ratings are underpinned by shareholder support from QNB.
ESG Considerations
The ESG Relevance Score for Management Strategy of '4' reflects an increased regulatory burden on all Turkish banks. Management ability across the sector to determine their own strategy and price risk is constrained by increased regulatory interventions and also by the operational challenges of implementing regulations at the bank level. This has a moderately negative impact on the credit profile and is relevant to the rating in combination with other factors.
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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