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11 December 2023

Qatar fund's stake buy to boost lenders

By Reuters

Qatar's sovereign fund plans to purchase a remaining 10 per cent stake of a promised 20 per cent stake in the Gulf state's banks to provide support to its local lenders.

The planned purchase by the Qatar Investment Authority (QIA) -- decided during the financial crisis and to take place in the first quarter -- will boost confidence in the sector and lift investor sentiment in the gas-rich Gulf state, analysts said.

"It demonstrates the significant level of support that the Qatar government said it would provide and has provided," said Richard Sykes, head of global markets at Standard Chartered in Qatar. "Clearly, for local banks that are listed, it will bring a boost in market capitalisation on the exchange."

Although the buy may result in short-term dilution of shares, analysts said that it would increase confidence overall in Qatar's banking sector.

On Monday, Qatar National Bank, Qatar's largest lender by market capitalisation, posted a 40.2 per cent jump in fourth-quarter earnings, beating analyst expectations as financing and interest income soared.

Its shares climbed 2.6 per cent to a record high on Tuesday.

Shares in other lenders rose, with Qatar Islamic Bank gaining 3 per cent and Masraf Al Rayan adding 3.1 per cent.

Qatar, which expects double-digit economic growth this year, has actively supported the banking sector as the global credit crisis hit the Gulf Arab region.

Last March, the Gulf state said it would allow banks to diversify their revenue base and bolster trading income by buying shares of listed companies on the bourse and re-entering brokerage operations.

Banks in the world's largest liquefied natural gas exporter, have benefited post the financial crisis, as the world's fastest growing economy spends more on infrastructure and related products.

Another analyst said even though the infusion may result in earnings dilution, it will help faster growth.

"In terms of earnings, this will be dilutive, but this situation can be reversed if banks are able to grow even faster as a result of having a better capital position," said Jaap Meijer, AlembicHC senior analyst.

In October, the Qatar central bank's 2009 financial stability review noted that the banking system was sound and banks had comfortable provisions against non-performing loans.