QNB looks to branch out as Europe lenders retreat

QNB taking advantage of the most growth among the 15 biggest banks in the Middle East and Africa to expand as Europe’s debt crisis prompts rivals such as Societe Generale to retreat from the region.The Doha-based bank, in talks to buy SocGen’s 77.2% stake in National Societe Generale Bank of Egypt, expanded assets by 25% in the second quarter and has a loan-to- deposit ratio of 97%, compared with SocGen’s 117%. Its market value gained 30% in five years, the fastest of the region’s top banks, according to data compiled by Bloomberg, while the company’s bonds have rallied to a record.QNB is larger than the country’s other banks combined by market value. It is expanding abroad to counter limited domestic growth in the country of 1.7mn people. QNB, which raised $3.5bn in a rights issue last year and sold $1bn of bonds in February, is benefiting from the state’s plans to fund $130bn in projects by 2019 ahead of its hosting of the soccer World Cup.“Qatari banks have been able to attract deposits and that’s given them extra cash to work with,” Nick Stadtmiller, head of fixed-income research at Emirates NBD in Dubai, said by telephone. “They have taken a strategic move to deploy that money in strategic assets abroad.”QNB’s bonds have rallied amid the bank’s expansion plans and economic growth in Qatar expected by the planning bureau at 6.2% this year. The yield on QNB’s 3.375% dollar-denominated bonds has fallen 42 basis points so far this quarter to a record 2.28% yesterday, according to data compiled by Bloomberg. That compares with a nine basis-point gain in the average yield on financial company debt in the six-nation GCC to 4.04% on September 21, according to HSBC/Nasdaq Dubai’s GCC Conventional Financial Services US Dollar Bond Index.QNB more than doubled its stake in Dubai-based Commercial Bank International to 39.9% last month. In April, it bought shares in Iraq’s Mansour Bank and 49% of Libya’s Bank of Commerce & Development. In January, it agreed to buy a majority stake in Morocco-based Union Marocaine des Banques.The bank said in April it had a five-year plan to make itself an “icon” in the Middle East and Africa by expansion and “diversifying income sources.” The lender, the region’s largest by assets, is the second institution in the world’s biggest exporter of liquefied natural gas to move to acquire an Egypt-based financial institution.QInvest, a unit of Qatar Islamic Bank, is seeking to form a joint venture with Cairo-based investment bank EFG-Hermes Holding in which it will control 60%.EFG-Hermes Holding raised Egypt to overweight this month on signs increased political stability will help external financing and foreign acquisitions. Egyptians elected Mohamed Mursi on June 24, its first president since the overthrow of Hosni Mubarak last year, and the country is negotiating a loan of as much as $4.8bn from the International Monetary Fund. Egypt’s EGX 30 stock index has been the world’s best performing this year based on 92 measures tracked by Bloomberg.West European lenders have exited markets as their loan-to-deposit ratios ballooned to an average 190%, according to data compiled by Bloomberg, compared with about 98% for Qatari lenders. SocGen and French rivals such as BNP Paribas and Credit Agricole have cut sovereign-debt holdings, trimmed headcount and reduced reliance on short-term funding to help allay investor concern that the European debt crisis will worsen.Societe Generale chief executive officer Frederic Oudea is trimming corporate- and investment-banking assets and cutting about 1,600 jobs. The bank reported a 42% drop in second-quarter profit on August 1 and is planning to sell some assets “to have a cushion” Oudea said at the time.BNP Paribas aims to raise $400mn by selling its Egyptian banking division, Le Monde reported on August 15, citing Reuters. Potential buyers for the 70 bank branches include National Bank of Abu Dhabi and QNB, it said.“QNB’s strong capital base allows them to do M&A,” Jaap Meijer, director of equity research at Arqaam Capital Ltd in Dubai, said by telephone. QNB “is the best capitalised bank in the region and can become the leader.”Doha Bank, Qatar’s fourth-largest by assets, said on September 19 it may raise as much as 5.81bn riyals ($1.6bn) selling shares as it seeks to expand in foreign markets and boost lending. The lender plans to raise the money in the first quarter of 2013 and needs shareholder approval for the capital increase, it said in a statement to the Qatar Exchange.Qatar accounts for about 77% of QNB’s assets and the country’s expected economic expansion is vulnerable to a drop in energy prices caused by a slowing world economy, the General Secretariat for Development Planning said in June.The cost of insuring Qatar’s debt against default dropped 23 basis points this year to 104 on September 24, according to CMA which is owned by McGraw-Hill Co and compiles prices quoted by dealers in the privately negotiated market. It fell to 97 basis points, the lowest in more than a year, on September 19. The credit risk of Qatar, which along with Abu Dhabi and Kuwait holds the best-rated debt in emerging markets, compares with 292 for Dubai and 45 basis points for the UK.“QNB is a huge bank in Qatar and the Qatar economy is not that big at the end of the day,” Emirates NBD’s Stadtmiller said. “When you are already 40% of the banking sector, you are going to have to grow outside the domestic market.”