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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 1,932 million during 9M10, down 11.4% YoY.

Net profit declined by only 0.8% YoY to QAR 1,326 million, as the bank reduced total operating expenses and impairment losses by 25.1% YoY.

We have revised our FY2010E operating income nominally downwards by 1.0% because of lower fees and commission income. However, we have revised our net profit estimate upwards by 1.8%, given lower impairments for the full year.

We are reiterating our OVERWEIGHT recommendation on CBQ with a revised target price of QAR 96.14, implying an upside of 15.3%.

Net Profit
Net profit during the period under review declined 0.8% YoY to QAR 1,326 million, due to lower operating income, partially offset by a decline in total operating expenses and impairment losses. In the year-ago period, net profit 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.

We had updated CBQ on August 18, 2010 with an OVERWEIGHT recommendation (target price of QAR 85.81, 16.3% upside). Currently, the bank’s stock is trading at a P/E multiple of 10.37x and 9.33x on 2010E and 2011E earnings, and at a P/BV multiple of 1.50x and 1.43x on 2010E and 2011E BVPS, respectively. Meanwhile, the stock has gained 35.0% since the beginning of this year, as opposed to a gain of 12.0% by the QE Index. Considering the above factors, we have arrived at a target price of QAR 96.14, representing an upside of 15.3% over the current price of QAR 83.40 (as of close on October 27, 2010). Accordingly, we are reiterating our earlier OVERWEIGHT recommendation on Commercial Bank of Qatar.

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