Reuters/Doha

Qatar’s sovereign fund’s planned purchase of the remaining 10% stake of a promised 20% stake in the State’s banks will boost confidence in the sector and lift investor sentiment, analysts said.

The Qatar Investment Authority (QIA) had decided during the financial crisis to complete the stake purchase in the first quarter of this year..

“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, the country’s largest lender by market capitalisation, posted a 40.2% jump in fourth-quarter earnings, beating analyst expectations as financing and interest income soared. Its shares climbed 2.6% to a record high yesterday.

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

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

Last March, the Gulf state had 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.

Meanwhile, QNB has said it plans to increase its capital by 25% through a rights issue in the second quarter of 2011 to fund “ongoing expansion plans”. The rights issue would be conducted at a price of QR 100 ($27.47) per share, it added.

“In view of the ongoing expansion plans, both locally and internationally,” QNB said it would “increase the bank’s capital after the bonus shares by 25% (one share for every four) through a rights issue to be conducted during the second quarter of 2011”.

This will be done at “QR100 per share which represents QR10 per share being the nominal share value and a premium of QR90 per share,” it added.

QNB, normally the first bank to report its earnings, is widely seen as a barometer of health for Qatar’s financial sector.

QNB is expanding aggressively in the Middle East and North Africa in countries like Oman, Syria, Tunisia, Sudan, Libya and Algeria.