Qatar's CBQ studying further capital-boosting measures - group head

Mon Feb 10, 2014 4:26am EST

Related Topics

* Capital-boosting measures may include retained earnings

* No further M&A planned as absorbs Turkey purchase

* Turkey economic turmoil to have no significant earnings impact

* Cost-cutting, better margins, lower provisions to boost 2014 earnings

By David French

DUBAI, Feb 10 (Reuters) - Commercial Bank of Qatar (CBQ) is studying a number of initiatives, including retaining earnings, to boost its capital base in the next 18 months, its group chief executive told Reuters.

The second-largest lender by assets in the Gulf Arab state sold a 2 billion riyal ($549 million) capital-boosting bond in December, raising its capital adequacy ratio to 13.9 percent after its reserves had been depleted by high loan growth and its purchase of a majority stake in Turkey's Alternatifbank.

"There are a number of initiatives which we are analysing to boost capital in the next 12 to 18 months," Andrew Stevens said. He wouldn't elaborate further, except to say there would be a proposal put to shareholders at their next meeting relating to retaining earnings.

CBQ will not complete any further acquisitions in the near future as it integrates the Turkish business into its organisation, Stevens said in a telephone interview from the bank's Doha headquarters.

"If you look at our previous acquisitions, it has taken us two to three years to digest them. This time, it is different as this is a full-scale consolidation so time is needed to digest, work out the management strategy and improve the links and governance standards between the two parts," Stevens said.

CBQ bought a 74.24 percent stake in Alternatifbank during 2013, part of a trend of Gulf banks looking to acquisitions to diversify their businesses away from competitive home markets.

Since late last year, Turkey has suffered economic instability, with the lira plunging 10 percent in a month, as investors worry about the country's current account deficit and the impact of a wide-ranging corruption probe.

The current Turkish turbulence is "violently disconcerting" but will have an "immaterial" impact on CBQ's profitability in 2014 as its Turkish business is a small part of the overall group, Stevens said.

PERFORMANCE

Stevens took up the group CEO role with responsibility for the bank's international operations in August, when Qatari Abdulla Saleh al-Raisi was appointed chief executive of the bank.

He said CBQ would focus on cutting its costs and managing its margins better in 2014, with an expanded retail business and lower provisioning boosting the bank's earnings.

CBQ reported a 32.9 percent drop in fourth-quarter net profit earlier on Monday as it was hit by higher provisioning for non-performing loans.

Stevens said impairments in 2013 were caused by a revaluation of Indian investments following the depreciation of the rupee, and provisions against loans to a Qatari real estate project and an Omani cement factory.

The bank had already provisioned for 10 percent of its Qatar property loan exposure in its second-quarter earnings, but was asked to take a further 10 percent impairment by the country's central bank at the end of the year, Stevens said.

He added he was confident that further provisioning wouldn't be required as real estate values in Qatar were recovering and that rental income generated by the project was enough to service the loan.

Meanwhile, the bank had commenced legal action against the developers of the unnamed Omani factory to recoup its money. CBQ had provisioned for 100 percent of the loan, he said. (Editing by Andrew Torchia)

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