Qatar's CBQ seeks to raise $549m

Commercial Bank of Qatar Q3 eyes bond sale as net profit falls 48% to $77m
By Reuters
Thu 31 Oct 2013 01:51 PM

Commercial Bank of Qatar (CBQ) plans to raise QR2bn ($549.3 million) through a bond sale in December to help replenish capital reserves depleted by its acquisition of a majority stake in a Turkish lender.

The announcement on Wednesday came as CBQ, Qatar's third-largest bank by assets, reported a 48.7 percent slump in third-quarter net profit on higher loan provisioning, widely missing the average forecast of analysts.

The bank, like many lenders in the Gulf Arab region, has looked to offset increased competition in its domestic market with foreign expansion.

CBQ bought 70.84 percent of Turkey's Alternatifbank in July, and added a further 3.4 percent through a public tender in September.

Analysts had warned even before the purchase was finalised that CBQ would have to raise reserves to enhance a capital adequacy ratio which, while high by Western standards, put it among the lowest in Qatar.

CBQ's total capital adequacy ratio - which includes Tier 1 and 2, or core and supplementary, capital - fell to 12.5 percent at the end of September from 17 percent at the end of 2012 on the back of the Turkish acquisition and higher lending, CBQ said in its earnings statement on Wednesday.

The perpetual bond sale, which must be approved by shareholders and the regulator, will boost the bank's capital ratio by 2.2 percentage points, a separate statement said.

Perpetual bonds, which have characteristics of both debt and equity, have become a popular tool for Gulf banks to raise capital - three lenders in the United Arab Emirates have done so in the last year.

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They allow banks to diversify their investor base, take advantage of historically low funding costs and enhance capital in compliance with the upcoming Basel III framework.

The upcoming issue will be in local currency and privately placed with investors, CBQ said.

CBQ made a net profit of 281 million riyals in the three months to Sept. 30, down from 548 million riyals in the corresponding period of 2012, according to Reuters calculations based on financial statements from the bank.

This was significantly below the 534 million riyals average forecast by eight analysts polled by Reuters.

Net profit for the first nine months of the year fell 16.6 percent to 1.31 billion riyals, CBQ said.

The bank said it booked net loan provisions of 122 million riyals in the third quarter, up from 32 million riyals in the same period of 2012. In the first nine months, they rose to 368 million riyals from 66 million riyals a year earlier.

The bank took a further provision against a major account outside Qatar, having originally classified it as non-performing earlier in the year.

CBQ's net profit fell despite a 34 percent jump in loans and advances over the course of the first nine months of 2013.

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