UPDATE 2-Doha Bank profit drops as provisions weigh

* Provisions weigh on Q3 results

* Net loans increase (Recasts, adds background, analyst comments)

DUBAI Oct 20 (Reuters) - Doha Bank DOBK.QA, Qatar's fourth-largest by market value, posted a 19 percent drop in third-quarter net profit, in line with expectations, as loan loss provisions weighed.

The bank's third-quarter net profit stood at 205 million Qatar riyals ($56.32 million), down from 254.56 million in the same quarter a year ago, according to Reuters calculations based on previous financial statements.

"The major positive surprise was the loan loss charges which were significantly lower than expected. The other one is the fee income which was better than expected," said Janany Vamadeva, analyst at HC Brokerage, which has a buy rating on Doha Bank with a target price of 64.6 Qatari riyals.

Shares closed up 0.58 percent on the day.

"NPLs (non-performing loans) have been increasing; provisions have also increased but it looks like further provisions will be required in 4Q09 given their high retail exposure," said Vishnu Kant, senior analyst at investment bank Sico.

"Positives are the increase in loans as well as deposits. Deposits have increased significantly quarter-on-quarter but it seems that cost of deposits has increased."

The bank's third-quarter results were in line with estimates by I/B/E/S, which forecast a quarterly profit of 204.45 million riyals.

Net loans and advances grew 6 percent to 25 billion riyals to September 30 from 23.6 billion riyals for the same period last year, and deposits grew 11.5 percent, a company release said.

Qatar's government last year launched measures to support the banking sector in the economic crisis, with the Qatar Investment Authority, the sovereign wealth fund, saying it would buy 10 percent of listed banks' capital by the end of the year.

Despite high capitalisation levels, provisioning for bad loans has weighed on Q3 results.

Statistics from the central bank posted on the website on Tuesday showed that total loan loss provisions in the sector increased 3.1 percent from August to September, to 4.9 billion Qatari riyals, and rose 8 percent from 4.6 billion riyals in July.

Qatar's three other main banks posted weaker results in previous weeks, but all took additional provisions against bad loans.

Qatar National Bank QNBK.QA and Qatar Islamic Bank QISB.QA reported a 7.5 percent and 53 percent drop in third-quarter net profit, respectively, while Commercial Bank of Qatar COMB.QA posted a 24 percent fall.

Doha Bank reported a nine-month net profit of 850.8 million Qatar riyals ($233.7 million), according to a statement posted on the local stock exchange, up 2 percent from the same period last year. The bank did not disclose Q3 figures.

It made a net profit of 833.8 million riyals in the first nine months of 2008. (Reporting by Nicolas Parasie and Rachna Uppal; Editing by Natsuko Waki)