Recent shows by QNB, Al Khalij Commercial Bank, Doha Bank, QIIB

12/10/2017 15:49 AST

Qatari banks have met investors in Europe and Asia over the past few weeks to gauge their interest in potential U.S. dollar bond issues, as a diplomatic crisis in the region pressures their finances, sources familiar with the matter said.

Feedback was positive, but while international investors are ready to buy Qatari banks’ paper, they have also made clear that issuers would have to pay premiums in order to attract sufficient demand.

Access to international debt markets, a crucial source of funding for Qatar’s banking sector since oil prices dropped three years ago, has become trickier since the crisis erupted in early June as investors fear its impact on lenders’ liquidity. Those worries have partly eased as a result of the meetings, said the sources.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with Doha, accusing it of supporting terrorism, a charge that Qatar denies. Since then, banks from the four countries have been pulling deposits from Qatar and freezing new business with Qatari institutions.

That is a headache because 55 percent of cross-border deposits in Qatar’s banks last year, plus a much smaller proportion of their cross-border borrowings, were from other nations in the Gulf Cooperation Council. Cross-border deposits accounted for about a quarter of their total deposits.

The search for alternative funding led Qatar National Bank (QNB) to sell a US$630 million Formosa bond to Taiwanese investors last month, while Qatar Islamic Bank recently raised funds through private placement deals in Japanese yen and Australian dollars. But no Qatari name has issued a public dollar bond since the crisis erupted.

“During the siege banks have to develop alternative markets, and the best way to develop a long strategy for securing new funding sources is through non-deal roadshows outside this region,” a Qatari banker said.

While roadshows not tied to a specific deal are common practice for bond issuers, Qatari banks have staged more since the crisis began. Al Khalij Commercial Bank, Doha Bank , Qatar International Islamic Bank and QNB have all met investors in recent weeks, said the sources.

Asian investors at a roadshow for QIIB last week were “neutral to confident” on Qatar, the Qatari banker said. It has now established a $2 billion Islamic bond issuance programme.

QNB declined to comment, while Al Khalij Commercial Bank and Doha Bank did not respond to requests for comment.

“The premium that Qatari banks would have to pay is about 30-40 basis points - that is the difference with what they would have paid to issue before the rift,” said a portfolio manager at an international investment firm.

“It obviously was much more at the worst point of the crisis, but that is where we are now. You might argue that for a new issue, they might need to incorporate some new-issue premium as well, so perhaps 50 bps total when compared to pre-rift to place new deals now.”

On Thursday, yields on conventional and Islamic bonds of lenders such as QNB, QIIB and Al Khalij Commercial Bank were more than 60 bps higher than levels before the crisis erupted, Thomson Reuters data showed.

A second fund manager said Qatari banks would have to pay up not only because of the increased political risk, but also because of general market conditions in the region.

“GCC is wider in general. Even if a UAE bank came to market now, they’d have to pay more given the oversupply.”

Total fixed-rate dollar-denominated issuance in the GCC, including sovereigns, has been about $74 billion so far this year, higher than a record-breaking $66 billion in 2016.


Ticker Price Volume
QNBK 159.00 144,076
SABIC 129.60 5,192,197
SRMG 106.00 898,130
EEC 19.96 1,817,656
APPC 56.30 191,440
SARCO 44.20 333,418
KAYAN 16.94 8,892,500
Affordable housing stimulates Riyadh’s real estate market


Although market conditions in Riyadh remain relatively unchanged this quarter, the governments’ continued focus on providing more affordable housing to drive home ownership amongst Saudi nationals wi

Saudi Gazette

UAE clarifies rules on payment of VAT on commercial real estate


The 5 per cent VAT on commercial real estate must be paid prior to the completion of an asset sale, not afterwards, the UAE’s Federal Tax Authority (FTA) said on Wednesday.

In a statement

The National

PEIE highlights investment opportunities


A delegation of Indian businessmen visited the Public Establishment for Industrial Estates (PEIE) on Wednesday in a bid to familiarise themselves with the investment climate in the Sultanate.

Times of Oman

Bahrain bond rally fizzles out as Gulf bailout remains elusive


Bondholders’ relief over a Gulf pledge to prop up Bahrain’s struggling economy has given way to anxiety now that three weeks have passed without any sign aid is on the way.

Saudi Arabia, Ku

Gulf News

Dubai banks continue to deliver strong results


Leading Dubai based banks, Emirates NBD, Emirates Islamic, Dubai Islamic Bank (DIB) and Mashreq reported strong growth in first half net profits supported by gains in core banking revenues.

Gulf News