Despite lower demand for credit in the private sector in the first half of the year, Commercial Bank of Qatar (CBQ) successfully refocused on retail marketing and improving its collection efforts. CBQ was on a tear in the lead-up to reporting its earnings, advancing more than 15 per cent since July 1, and did not disappoint with its results. The bank's net profit for the second quarter was 408 million Qatari rials, up 23 per cent from the same period last year.
Daniel Cowan, an analyst with Morgan Stanley, raised his price target this week to 97.20 rials from 96.60 rials, maintaining an overweight rating on the stock. CBQ closed yesterday at 71.80 rials, still allowing for an increase of more than 30 per cent from yesterday's closing price. Like other Qatar banks, CBQ owes much of its recent success to the government's anticipation of the financial crisis and subsequent injection of cash into the system before most governments in the Gulf took similar action. In October 2008, Qatari officials said the government would increase its equity stakes in local commercial banks to at least 10 per cent. That assistance helped keep provisions to a manageable level, although they rose 2.2 per cent from June to July this year, Qatar's central bank said on Tuesday. The rate at which provisions grew was lower than in the previous month, while loans grew 1.6 per cent.
CBQ has helped its profit situation more by focusing on outstanding loans, as non-performing loans have fallen by 22 per cent since the fourth quarter of last year. CBQ also has one of the highest rates of return on assets among emerging-market banks, Mr Cowan said. "We believe the bank can combine attractive growth and a generous dividend over the mid-term." Near-term catalysts for the stock to climb further will be improved loan growths and margins. Mr Cowan said he expected 9 per cent growth for the full year, down from an earlier forecast of 12 per cent.