Qatar's Doha Bank boosts capital with $549m bond sale

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Doha Bank CEO, R Seetharaman.

Doha Bank CEO, R Seetharaman.

Qatar's Doha Bank said on Tuesday returns on its share capital would be lower this year due to tough competition in its home market, though a successful bond sale would boost its financial ratios.

The bank, the fifth-largest by assets in the Gulf Arab state, finalised the sale of the QR2 billion ($549 million) bond - which enhances its tier 1, or core, capital - on the last day of 2013, chief executive R Seetharaman told reporters at a press conference.

"Two billion was added to the equity from a note that was issued on the last day of last year," Seetharman told reporters, adding the bank as no immediate plans for further bond issues.

Doha Bank has been raising its reserves in the last year to improve its capital ratios which, while high by international standards, were below many of its local peers.

It had raised QR1.55 billion from a rights issue in March which boosted its share capital by 25 percent.

Following the bond sale, Doha Bank's tier 1 capital ratio stood at 16.6 percent, Seetharaman told the event on the bank's 2013 results.

The lender reported flat net profit of QR1.31 billion while assets and lending grew 21.3 percent and 21.8 percent respectively.

Lending growth in Qatar has been a major driver of banks' profits in recent quarters and is expected to remain high for the medium term as the Gulf Arab state spends billions of dollars on infrastructure and preparations to host the soccer World Cup in 2022.

But competition is fierce, with 18 local and foreign banks serving a population of just 2 million people, and one player having a more than 20 percent market share.

Seetharaman would not be drawn on a net profit forecast for 2014 but said Doha Bank's return on equity would fall to around 15 percent in 2014 from 17.9 percent last year.

"There are a growing number of banks locally... it's eroding margins," he said.

Some Qatari banks have looked to overseas acquisitions to counter tighter conditions at home, withQatar National Bank and Commercial Bank of Qatar buying businesses in Egypt and Turkey respectively in 2013.

Doha Bank has pursued organic expansion up until now, getting approval to start operations in India in December, and this would continue as increased regulation made buying lenders overseas more difficult, Seetharaman said.

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