Bloomberg/Doha/Dubai

QNB, which agreed to buy Societe Generale’s Egypt unit, is set to become the first Arab lender with assets exceeding $100bn amid a drive to tap consumer lending in more populous markets.
Doha-based QNB said on December 13 it will pay $1.97bn for 77% of National Societe Generale Bank. The deal will give the lender, which overtook Saudi Arabia’s National Commercial Bank for the region’s top spot a year ago, a foothold in the Arab nation of more than 83mn. It will also boost the bank’s assets by 11% to about $107bn, more than double their value at the end of 2009 and six times above the Middle East average, data compiled by Bloomberg show.
QNB, which raised $2bn in bonds this year, said it also seeks to buy a majority stake in one of Turkey’s top 10 banks as part of a strategy to more than double the ratio of profit it derives from global operations by 2017. The plan mirrors the drive by Qatar to use a cash windfall from liquefied natural gas holdings to snap up assets worldwide, including London’s Harrods department store.
“QNB is going the right way, expanding into populous markets,” Rami Sidani, Dubai-based head of Middle East and North Africa investments at Schroder Investment Management Ltd, said by phone on December 18. “Qatar is a market driven by government lending, not retail-focused, given its small population. QNB has decided to expand into markets where it can benefit from real retail dynamics.”
With NSGB, Egypt’s second-biggest publicly traded lender, QNB will own about 160 branches across Egyptian cities, more than main rival Commercial International Bank Egypt. A foray into Turkey would help the bank secure clout in the biggest economy in the Middle East and Eastern Europe after Russia.
Moving into Egypt carries risks since nine out of every 10 adults doesn’t have a bank account, the Middle East’s lowest ratio apart from Yemen, according to the World Bank. Political turmoil has also forced Egypt to delay an International Monetary Fund loan agreement deemed as crucial to revive investments and pry economic growth from near a 19-year low.
QNB’s bonds haven’t rallied as much as regional peers this year, while its shares are down 4.9%, compared with a 3.8% drop for Qatar’s benchmark index. The yield on the 3.375% dollar-denominated notes due 2017 declined 113 basis points, or 1.13 percentage points, since their sale in February to 2.24% yesterday, according to data compiled by Bloomberg. HSBC/Nasdaq Dubai’s GCC Conventional Financial Services US Dollar Bond Index, by comparison, yielded 2.98% on Wednesday, down 271 basis points.
Emirates NBD said yesterday it would buy BNP Paribas’ Egyptian unit in a $500mn deal that will help the UAE’s biggest bank wean itself off of reliance on a domestic market of 8.3mn.
Credit growth in Qatar is being spurred by government plans to invest $130bn to build roads, sporting facilities and a metro and rail system before hosting the 2022 soccer World Cup. Public sector lending, which accounts for 42% of the total, surged as much as 99% in the year to May, the fastest pace in two years, before slowing to less than half that rate in October, according to central bank data.
The Qatari bank wants to secure 40% of profit from operations abroad in five years, up from 17% now, chief financial officer Ramzi Marie said on a conference call on December 13.
QNB’s assistant general manager for group strategy, Mohamed Moabi, listed Turkey, Morocco and Saudi Arabia, where QNB has applied to open a branch, as target markets. “In the next three years, these are the countries where we will be paying close attention to available opportunities,” he said on the call.
The lender, whose market capitalisation has more than doubled in the past three years, is acting prudently despite the fast pace of expansion, Schroder’s Sidani said. QNB bought NSGB shares at about 11% below the market price, showing investors it’s “not willing to overpay for any expansion,” Sidani said. It also lost out to Sberbank in May in its bid to buy Istanbul-based Denizbank AS.
“We have seen how the bank backed down from Dexia because it didn’t meet the price level they were targeting and that was followed by an acquisition of a very strong franchise in Egypt,” Sidani said. “What we really like is the discipline.”
In Egypt, loan growth may triple next year to 15% as it recovers from last year’s popular uprising and secures a $4.8bn IMF loan, according to Deutsche Bank estimates in October, before a spike in unrest over the past month. NSGB’s 2013 profit may increase 9%, according to the average estimate of seven analysts on Bloomberg.
Qatar, the world’s richest country on a per-capita income basis, extended a $2bn aid package to Egypt’s government to help stem the decline in foreign-currency reserves.