Qatar steps in to boost bank sector
The Qatar government has decided to purchase the investment portfolios of seven Qatari banks Qatar yesterday launched new measures to support its banking sector with a government plan to buy banks’ investment portfolios in a bid to revive lending and support the economy, sending financial shares soaring. “The government is studying a system to take these shares from banks, which will help increase lending,” Prime Minister HE Sheikh Hamad bin Jassim bin Jabor al-Thani said, according to the state-run Qatar News Agency.
The emergency measure, the second in Qatar, underscores how the global financial crisis has smashed hopes that the energy-exporting Gulf Arab region would escape due to its petroleum revenues and massive sovereign savings. Qatar bank shares leapt over 9%, driving the Doha bourse up 8.85%, its biggest gain since October 14.
“This is great news for the markets,” said Haissam Arabi, chief executive of Gulfmena Alternative Investments, a regional specialist hedge fund company. “By taking away the investment portfolios of the banks, the banks do not have to provision for any losses and can take it away from their books. It boosts their solvency and supports them.” Banks included in the plan are Qatar National Bank (QNB), Commercialbank, Doha Bank, Qatar Islamic Bank, Qatar International Islamic Bank, Ahli Bank and Al Khalij Commercial Bank, according to a government statement issued by the Doha bourse.
Already in October, Qatar launched a $5.3bn plan to buy 10% to 20% of banks’ listed capital to mitigate the impact of the crisis. “This measure will improve the risk profile of banks and remove volatility in share trading,” said Kapil Chadda, managing director of global banking at HSBC Qatar. “If you compare Qatar to some other countries in the region, Qatar has been the most proactive in taking precautionary measures so that any risk does not snowball.” The share purchase process will be completed before the end of March in co-ordination with Qatar Central Bank, the government statement said. Qatari bank officials welcomed the move. “It brings us market stability, supports us for growth and improves liquidity. It is also going to improve the earning capacity of banks,” Doha Bank chief executive R Seetharaman said.
