Qatar’s QNB Plans Expansion After Absorbing Shock of Standoff

Qatar National Bank QPSC has absorbed the shock of last year’s Saudi Arabia-led isolation of the gas-rich state and plans to push ahead with its expansion strategy. The Middle East’s biggest bank by assets expects that profit will increase 5 percent to 7 percent this year, Chief Executive Officer Ali al-Kuwari said in an interview. QNB will continue to diversify earnings by targeting Southeast Asia, while focusing on its main markets in Qatar, Egypt and Turkey, he said.

QNB said Tuesday that annual net income rose 6 percent, meeting analysts’ estimates, as the lender cut impairment charges. The profit growth was at the slowest pace in at least 10 years with operating income remaining little changed from a year earlier. “Some business people who were thinking of investing somewhere else are bringing their investment to Qatar,” al-Kuwari said at the bank’s headquarters in Doha on Wednesday. “We see many opportunities in food supply, logistics and transport.”

Qatar, which has been boycotted by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt since June, has found support from countries such as Turkey and Iran to keep its food supply and logistics sectors intact. The country’s huge currency reserves also helped cushion the impact on its economy and financial system.

QNB Capital, the lender’s investment-banking arm, won the mandate to advise on the initial public offering this year of Baladna Farms, a dairy producer that’s become known for flying thousands of cows during the first months of the embargo. The bank is in talks with other clients seeking to finance their expansion, al-Kuwari said, declining to provide details.

While the bank’s diversification outside of Qatar helped blunt some effects of the isolation, it also introduced other risks. The devaluation of Egypt’s pound shaved a percentage point off QNB’s 2017 annual profit growth, al-Kuwari said.

Another challenge is for QNB to maintain an efficiency ratio of 29 percent, he said. “To have other markets like Turkey, Egypt, Indonesia, it would be very difficult to maintain this level,” al-Kuwari said.

The lender was able to boost deposits in 2017, with most of the new funding in dollars, al-Kuwari said. The bank will continue to seek funding from around the world and still has more than half of a $17.5 billion bond program available that it can tap, he said.

“We already absorbed the shock,” he said. “We are operating our business as if this crisis will continue forever.”

Sources: Bloomberg with assistance by Hussein Slim