Feb 07 2011 |
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Economic policy: QIA buys another 10% stake in local banks
On January 10th the prime minister, Sheikh Hamad bin Jassem bin Jabr al-Thani, announced that the country's sovereign wealth fund, the Qatar Investment Authority ( QIA ), would buy another 10% stake in Qatari banks, as promised by the government during the 2008 global financial crisis. The new stake will be acquired through the issue of new shares by the banks. The transaction will be completed during the first quarter of 2011. The owners of the new shares will not be entitled to dividends declared by the banks for 2010.
The acquisition of new shares by the QIA follows the government's announcement in 2008 that it would take a 20% stake in Qatari banks to strengthen their capital bases. A 5% stake was acquired in January 2009 for QR2.6bn (US$714m), followed by a second 5% in January 2010 for QR2.7bn. Besides the direct capital injection, the QIA has purchased the banks' listed equity shares on the Qatar Exchange and acquired part of the banks' real estate investment portfolio to help them withstand future global financial crises.
The fresh capital injection is intended to strengthen banks' balance sheets in view of the Basel III requirements, and to enable them to fund higher loan growth in expectation of the 2022 football World Cup, which Qatar will be hosting. By end-November 2010 Qatari commercial banks' total capital-adequacy ratio was 16.3%, which is expected to rise by 50-100 basis points, depending on the issue price and the actual amount of shares issued and subscribed to by the government. Moody's Investors Service, a credit-rating agency, has described the government's move as being "credit positive" and expects it to promote credit growth to the pre-crisis levels of 25-30% in the medium term. At the time of going to press, five lenders—Commercialbank, Doha Bank, Qatar Islamic Bank, Qatar International Islamic Bank and Ahli Bank—had received funds from QIA in lieu of shares.
Meanwhile, the country's largest bank, the half state-owned Qatar National Bank (QNB), has announced plans to increase its capital by 25% through a rights issue in the second quarter of 2011 to fund ongoing expansion plans. The rights issue will be conducted at a price of QR100 (US$27.47) per share.
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