Wednesday, Oct 20, 2010
(This story was originally published Tuesday.)
DOHA Zawya Dow Jones)--Commercial Bank of Qatar's chief executive Tuesday dismissed fears that heavy capital inflows into the Gulf Arab state could hurt the banking system saying much of the "hot money" has found its way into other parts of the region.
"I think the pressure on Qatar has been relieved somewhat," chief executive Andy Stevens said in a telephone interview with Zawya Dow Jones.
"I think there has been a re-routing of some of these funds into the United Arab Emirates economy in recent months. We are not overly concerned about that, we have a well diversified funding base," he added.
In a wide-ranging report analyzing Qatar's financial system, the gas-rich state's central bank said late Monday it was vigilant to the threat of large capital inflows into the country as investors from developed economies exploit higher interest rates in the Gulf than in their home markets.
Shares in CBQ closed 0.1% higher at QAR86.10 in a positive overall market Tuesday. Earlier Tuesday CBQ posted a 29% year-on-year rise in third quarter net profit to 508 million Qatari riyals ($139.5 million) on lower provisions and higher lending.
"The whole of the GCC [Gulf Cooperation Council region] has witnessed large inflows from western economies," Stevens said. "Interest rates have come down [in Qatar] quite dramatically over the course of the nine months [this year] and as a result a lot of the hot money has flown elsewhere into the G.C.C where [interest] rates are higher."
The Qatar central bank in a surprise move in August slashed its overnight deposit facility--the rate which determines how much interest banks make from parking funds with the central bank--by 50 basis points to 1.5% from 2%, a move widely seen to encourage lending.
Investors from the developed nations, where governments are trying to spur flagging economies by encouraging lending with rock bottom interest rates, have recently targeted a spate of heavily oversubscribed Gulf bond issues which offer far better yields than they can find at home.
CBQ, which last tapped the capital markets in November 2009 with a two-part $1.6 billion bond program, doesn't have plans to issue new debt, its CEO said Tuesday.
"Given the loan asset growth we are engendering we don't feel there is a need to tap into these markets for the time being," Stevens said.
While CBQ's net provisions for loans and advances fell to QAR57 million in the first nine months, down from QAR289 million a year earlier, its non-performing loan ratio on a 90 day basis increased to 2.96% at the end of September this year from 2.67% the previous quarter.
Stevens said this was because the central bank has asked CBQ to include a corporate default reported in the second half of last year in its NPL ratio even though the lender has recovered 75% of it.
By Alex Delmar-Morgan, Dow Jones Newswires; +974 659 9818; alex.delmar-morgan@dowjones.com
Copyright (c) 2010 Dow Jones & Co.
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20-10-10 0350GMT
