Qatar gov't to buy investment shares from banks

FAST TRACK: Qatar is expected to be the fastest-growing economy in Gulf region in 2009.

Qatar launched new measures to support its banking sector on Monday with a government plan to buy banks' investment portfolios in a bid to revive lending and support the economy, sending financial shares soaring.

"The government is studying a system to take these shares from banks, which will help increase lending," Qatari Prime Minister Sheikh Hamad bin Jassem Al Thani said, according to the state-run Qatar News Agency.

The emergency measure, the second in Qatar, underscores how the global financial crisis has smashed hopes that the energy-exporting Gulf Arab region would escape due to its petroleum revenues and massive sovereign savings.

Even Qatar, the one bright spot due to massive exports of liquefied natural gas and growth expectations of around 10 percent in 2009, has not escaped the liquidity crunch, with some bank shares falling around 70 percent in the last 12 months.

Qatar bank shares leapt over nine percent, driving the Doha bourse up 8.85 percent, its biggest gain since Oct. 14.

"This is great news for the markets," said Haissam Arabi, chief executive of Gulfmena Alternative Investments, a regional specialist hedge fund company.

"By taking away the investment portfolios of the banks, the banks do not have to provision for any losses and can take it away from their books. It boosts their solvency and supports them."

Banks included in the plan are Qatar National Bank, Commercial Bank, Doha Bank, Qatar Islamic Bank, Qatar International Islamic Bank, Ahli Bank, and Al Khalij Commercial Bank, according to a government statement issued by the Doha bourse.

Qatar's move to support its banks follows a string of measures by other Gulf Arab governments to address the financial crisis and support banks, including rate cuts, deposit guarantees and emergency funding facilities.

Already in October, Qatar launched a $5.3 billion plan to buy 10 percent to 20 percent of banks' listed capital to mitigate the impact of the crisis.

"This measure will improve the risk profile of banks and remove volatility in share trading," said Kapil Chadda, managing director of global banking at HSBC Qatar.

"If you compare Qatar to some other countries in the region, Qatar has been the most proactive in taking precautionary measures so that any risk does not snowball."

The share purchase process will be completed before the end of March in coordination with Qatar Central Bank, the government statement said.

It said the price of the investments purchased will be defined according to the cost of the portfolio registered in the banks records on February 28, 2009 minus allocations accumulated by the end of Dec. 31, 2008.

"Such procedures reflect the due concern of the government in the banking sector," the statement said.

Qatari bank officials welcomed the move.

"It brings us market stability, supports us for growth and improves liquidity. It is also going to improve the earning capacity of banks," Doha Bank Chief Executive R Seetharaman told Reuters by telephone.

Qatar, the world's biggest exporter of liquefied natural gas, is expected to be the fastest-growing economy in the Gulf region in 2009.

Its minister of state for energy and industry affairs said in February that the economy should expand about 10 percent this year as it boosts natural gas production.

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