Qatar’s Doha Bank Boosts Capital With Bond Sale

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 2 billion riyal ($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 1.55 billion riyals from a rights issue in March which boosted its share capital by 25 per cent.

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 1.31 billion riyals while assets and lending grew 21.3 per cent and 21.8 per cent 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 per cent 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 per cent in 2014 from 17.9 per cent 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, with Qatar 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.