Doha Bank, Qatar's fifth-largest bank by market value, is considering selling shares in London as part of a plan to boost capital by up to $1.6bn in 2013, four banking sources said.
The lender, part-owned by the Gulf state's sovereign wealth fund, may raise about a quarter of the capital through an issue of global depository receipts (GDR) on the London Stock Exchange, with the remainder raised through a local rights issue, two of the sources said, speaking on condition of anonymity because the matter has not been made public.
A GDR is a certificate that represents a block of shares in a company. GDRs are often issued by firms in emerging market states to allow foreign investors to buy the stock more easily.
Doha Bank's capital levels are lower than its Qatari peers and proceeds from the share issue are expected to be used mainly to help to plug that shortfall.
"The bank needs to boost capital and that's the main reason for the rights issue," one Gulf-based banking source said. "If they end up raising more than a billion dollars comfortably, some of it could be used for expansion purposes."
Chief executive R Seetharaman declined to comment on specific details of the bank's plan but said that it is ultimately up to shareholders to decide on the capital increase.
The lender said last month that it could increase its capital 50 percent by the first quarter of 2013 to help to finance its expansion plans. It has a market value of about $3.2bn.
Arqaam Capital analyst Jaap Meijer last month said that Doha Bank's capital base is "very tight".
A rights issue with shares priced at a 30 percent discount will help to raise about QR4.1bn ($1.13bn), Meijer wrote in a research note, adding that the bank's core Tier 1 capital ratio would fall to 9.6 percent by the end of 2013 without a capital increase.
At the end of March the bank's Tier 1 ratio was 10.7 percent. Its capital adequacy ratio (CAR) stood at 13.3 percent, against the Qatari central bank's minimum requirement of 10 percent.
One U.S. bank source said that a part-GDR offering by Doha Bank would make steep discounts unlikely.
Any plans to issue shares in London has to be approved by the Qatar central bank, sources said, adding that a previous plan to issue GDRs was put on hold by the regulator in 2009.
Doha Bank originally hired JP Morgan Chase for the 2009 issue, the four sources said. The US bank is likely to be involved in the current process, but multiple lenders were making informal pitches for a role in the new offering, the sources added.
It was not known whether other banks had been hired as advisers.
The Qatar Investment Authority (QIA), the state fund, owns a near-17 percent stake in Doha Bank, according to the lender's 2011 annual report.
"The rights issue will be successful if they get the blessing of the QIA. A lot will depend on whether the fund is willing to participate in the offering," a banker with a European lender said.
Qatari banks are expected to benefit from the country's breakneck expansion plans - Qatar will host soccer's World Cup in 2022 - and many have already tapped debt capital markets this year to raise cash for long-term lending.
This includes Doha Bank, which raised $500 million from a bond sale in March. It was advised by JP Morgan and Morgan Stanley Inc.
Doha Bank shares closed down 0.36 percent at 54.90 riyals on Qatar's main exchange last Wednesday, down 14.35 percent on the year. The market has been closed since for a Muslim holiday.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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