Fund lifts Qatar National Bank to multi-year high

Shares of Qatar National Bank surge to their record highest since June 2003 after the lender published a 36 per cent increase in net profits, beating analyst estimates.

Qatar National Bank (QNB) rose yesterday to its highest since 2003 after the Qatar Investment Authority (QIA), the country's sovereign wealth fund, announced it would be taking an additional 10 per cent stake in its local banks during the first quarter.

"It is positive because it would allow banks to grow even faster by increasing their capital, strengthening their balance sheet and they would be able to lend more," said Tarik el Mejjad, an analyst at Nomura in London. QIA initially took a 10 per cent stake in Qatari banks in 2009 to replenish their capital after the global crisis.

QNB is expected to be among the main beneficiaries. The lender this week reported a 36 per cent increase in net profitto 5.7bn rials for the full year, above analyst estimates. Loan growth was up 40 per cent year on year, and deposit growth was 31.5 per cent higher. Non-performing loans remained under control, edging up slightly to 0.9 per cent last year from 0.7 per cent in 2009.

QNB released its fourth-quarter results but did not issue full-year financials, saying those data needed the approval of Qatar Central Bank.

QNB has proposed a cash dividend of 5 rials a share for last year, up 62 per cent from 2009.

The board also recommended a 25 per cent increase in capital through a rights issue in the second quarter of this year. This should dilute the equity of existing shareholders, but analysts think the long-term effect will help the share price.

The bulk of the capital increase should be employed for future growth, said Jaap Meijer, the head of the banking research team at Alembic HC Securities in Dubai. The issuance will be used to fund the bank's expansion plans, locally and internationally, and maintain its current credit rating, Mr Meijer said. "The capital increase initially should be dilutive, roughly 13 per cent, but we expect this to reverse quickly, due to the strong expansion and the high returns of the bank," he said.

QNB gained 0.5 per cent to close at 200.8 rials yesterday.