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Commercial Bank of Qatar

Source: Taib Bank

Quarterly Result Update

Commercial Bank of Qatar (CBQ) reported a total operating income of QAR 1,243 million during 1H10, down 16.9% YoY.

Net profit declined 13.3% YoY to QAR 818 million during 1H10.

We have revised our FY2010E operating income downwards by 3.0% on account of lower net interest income estimate. However, we have revised our net profit estimate upwards by 11.4%, accounting for lower impairments for the full year.

We are reiterating our OVERWEIGHT recommendation on CBQ with a revised target price of QAR 85.81, implying an upside of 16.3%.

Net Profit
Bottom-line declined 13.3% YoY to QAR 818 million during 1H10, hurt by lower non-interest income and a 9.8% drop in the share of profit of associates. Moreover, net profit in the year-ago period had benefitted from the inclusion of QAR 165 million as exceptional gains from the sale of real estate assets and a QAR 56 million dividend income from the sale of the bank’s share portfolio to the Qatari government. As a result, the adjusted EPS was down to QAR 7.22 from QAR 8.32.

We had updated CBQ on June 16, 2010 with an OVERWEIGHT recommendation (target price of QAR 79.29 on a 21.6% upside). Currently, the bank’s stock is trading at a P/E multiple of 9.33x and 8.05x on 2010E and 2011E earnings, and at a P/BV multiple of 1.34x and 1.27x on 2010E and 2011E BVPS, respectively. Meanwhile, the stock has gained 19.4% since the beginning of this year as opposed to a gain of 1.7% by the Qatar Exchange’s DSM 20 Index. Considering the above factors, we have arrived at a target price of QAR 85.81 representing an upside of 16.3% over its current price of QAR 73.80 (as of close on August 18, 2010). Accordingly, we are reiterating our earlier OVERWEIGHT recommendation on Commercial Bank of Qatar.

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