Some positives

Doha Bank is exposed to the high-regulation, low-growth area of retail lending, so we were expecting weak growth and pressure on fee income. There was not much of a surprise on operating income, but loan growth was solid and provisioning was better than we forecast, providing a short-term positive.

Headline net income beat due to lower provisioning
Headline net income for 2Q11 of QR339m rose 13.2% yoy, falling 6.5% qoq, but still beating our expectations primarily due to a low provisioning number. This low provisioning number was related to improved NPLs on both a reported and calculated basis, after a negative drift in 1Q11, which may have been due to a rebound in retail NPLs as guided by the bank.

On the balance of things, these results shifted the balance of risk positively
We believe there were more positives than negatives in these results, with loan growth and loan quality better than we forecast (on a second look). Asset yields have taken a tumble, most probably due to regulation, but we don’t at the moment believe this outweighs the positives. Nevertheless, none of these variances are particularly material on a longer-term basis, unless Doha Bank’s public sector loan growth is here to stay. We don’t expect this yet. We maintain our Hold recommendation with a target price of QR57.6.

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