Standard & Poor's Ratings Services has revised its outlook on The Commercial Bank of Qatar to stable from positive reflecting a tougher operating environment.

It has affirmed its 'A-/A-2' ratings on the bank.

"With the outlook revision, we are indicating a reduced likelihood of an upgrade in the short to medium term," said Standard & Poor's credit analyst Mohamed Damak.

The ratings on CBQ reflect the bank's good commercial position and satisfactory financial profile. The ratings are constrained by the bank's less supportive operating environment, narrow domestic market with high concentration risks, and rapid loan growth. Standard & Poor's considers CBQ to be a systemically important bank in the State of Qatar (AA-/Stable/A-1+), which we classify as "interventionist" toward its banking system.

"Therefore, the long-term rating on CBQ is one notch above the bank's stand-alone credit profile, reflecting our expectation of high likelihood of support in case of need," he said.

The second-largest bank in Qatar, CBQ is a midsize player by regional standards, with assets totaling Qatari riyal (QAR) 61.2 billion ($16.8 billion) at year-end 2008. The bank acquired a 40 per cent stake in Sharjah-based United Arab Bank in 2007 and previously bought a 34.8 per cent stake in National Bank of Oman. While these purchases have improved CBQ's geographic diversification, the risk profile of these institutions is higher than that of CBQ's domestic core businesses,  S&P said.

"The stable outlook balances CBQ's good commercial position  and satisfactory financial profile with its less supportive operating environment," said Damak.

"We would lower the ratings if the bank's liquidity, profitability, or asset quality deteriorate more rapidly than we now expect or if the credit profile of the bank's associates weakens dramatically. We see limited room for a positive rating action in the foreseeable future. In the longer term, we could raise the ratings if CBQ strengthens its financial profile, reduces concentration risk, and demonstrates its ability to control risks at its associates," he said.