QNB Asia expansion helps weather GCC conflict

QNB’s Asia expansion helps weather Saudi-led economic blockade.QNB’s expansion into Asia is helping the lender offset the impact of the ongoing Saudi-led economic blockade to isolate Qatar, its chief executive officer said. The Middle East’s biggest bank by assets aims to cut the income generated from its domestic market to 50% by 2020 from about 63% currently, Ali Ahmed al-Kuwari said in a Bloomberg TV interview, his first since the siege began on June 5. The bank will apply to open a branch in Hong Kong this year and convert its China representative office to a branch, he said.

“We are going to be pushing more in Southeast Asia,” al-Kuwari said at the bank’s headquarters in Doha on Wednesday. “We do business in 31 countries and our diversification is really working and helping to overcome any crisis.”
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Al-Kuwari: No abnormal increase in the cost of funding

The bank also plans to open new branches in Oman, Kuwait and India, he said. Saudi Arabia, the UAE, Bahrain and Egypt cut diplomatic relations with Qatar and closed transport routes last month. Some banks in these countries are said to have cut their exposure to Qatar, but Qatari lenders are boosting interest rates on dollar deposits to shore up liquidity.
QNB shared climbed 4.2%, the most in almost 11 months, at the close in Doha yesterday. QNB is the index’s biggest member with a weighting of about 17%. The impact from the one-month standoff with its neighbours “is very little,” said al-Kuwari, who has led the bank since July 2013. Gulf countries “represent less than 5% of the balance sheet. Even if the situation continues forever, to diversify 5% is so easy and doesn’t really take so much,” he said. QNB on Tuesday reported a 2% increase in second-quarter profit to 3.45bn riyals ($929mn) as provisions and expenses dropped. EFG-Hermes Holdings had estimated a profit of 3.21bn riyals, while NBAD Securities predicted 3.47bn riyals.

The bank is maintaining its annual profit guidance at 6% to 8% and expects its diversified revenue and funding sources to mitigate the regional standoff, al-Kuwari said.
“We didn’t see any abnormal increase in the cost of funding,” he said. “QNB is a highly-rated institution, it’s an AA institution. Investors love the QNB story, love the Qatar story.” QNB has more than doubled its assets to $211bn over the past five years, according to data compiled by Bloomberg. It’s also spent about $6bn on acquisitions in countries including Egypt and Turkey. It bought Societe Generale’s Egypt unit and a 20% stake in Togo-based pan-African lender Ecobank Transnational. It also bought Turkey’s Finansbank for $3bn in 2015.