Profitability jumps by 17%YoY and 3% QoQ in 3Q11

Top-line grows on account of volume growth and improved spreads

Asset quality improves, coverage increases

Buy: CBQ, QNB; Hold: Doha, QIB and MAR

Profitability jumps by 17%YoY and 3% QoQ in 3Q11
Qatar banks under our coverage performed well during 3Q11 with profits rising by 22% YoY and 3% QoQ. Both QNB and CBQ, in line with our expectation, posted strong profitability growth with their bottom lines expanding by 5% QoQ and 8% QoQ respectively. However, QIB profitability results came as a positive surprise with the bank recording a growth of 6% QoQ. MAR and Doha were the only banks that witnessed a QoQ decline in profits (down 12%QoQ and 7%QoQ respectively) and were marginally off our expectation.

Valuation update – Maintain BUY, increase fair value
A change in forward estimates lead us to alter our fair value for QNB from QAR160.8/share to QAR167.5/share; an upward revision of 4.3%. We continue to believe that QNB’s business model remains robust, and that the bank’s asset quality is better than most of its GCC peers, with ample provisioning. Given its size (among the top three largest banks in GCC) and strong ties with the state, the bank will continue to capture Qatar’s public sector credit growth which is expected to remain high due to the ongoing preparation to the World Cup. At the current rice, the stock offers an upside potential of 11.3% and we therefore maintain a BUY on the stock.

Valuation update – Maintain BUY, increase fair value
We have increased our valuation for CBQ by 11.5% with the new fair value at QAR96.7/share, post incorporation of current results into our full year estimates and roll-over of multiples to 2012. The recent results re-affirm our positive outlook on CBQ’s stock. Given its relatively strong balance sheet, solid long-term funding and high capitalization level, the bank is expected to do well in the near term. Dividend yield is expected to remain high and is forecasted to be 7.5% in 2011e, which is one of the highest in our coverage universe and next only to Doha Bank. The stock trades at a 2012e P/BV multiple of 1.5x, which is the lowest among our coverage universe and 27% discount to the Qatari banking industry multiple. At the current market price, the stock offers an upside potential of 17.4% over our fair value; thereby making it our top pick in the sector. We therefore recommend a BUY on the stock. However, given its attractiveness and positive outlook, CBQ is currently at its foreign-ownership limit (19.1% foreign ownership limit) and off to foreigner investors.

Click here to download the complete report
  • Portfolio Current Value
  • Today's Gain
  • Overall Gain
  • Overall Gain (%)

  •   ()