Qatari lenders look to join the spending spree

Qatar's biggest financial institution, the Qatar National Bank (QNB), as well as one of its oldest, the International Bank of Qatar (IBQ), have both recently appeared at the forefront of this trend.

The IBQ, formerly the Grindlays Qatar Bank and established more than 50 years ago, hit the headlines a few weeks back when it launched an audacious $6.1bn cash and stock bid for Bahrain's biggest lender, the Ahli United Bank.

The AUB, with assets totalling around $22bn, was first reported to have been a target for the Kuwait Projects Company in the late spring, but a deal for a stake of at least 13 per cent collapsed in early July after Kipco refused to meet the desired asking price of $2 a share.

Deal hits the buffers

The IBQ launched its own bid for the AUB in mid July and on a much grander scale. The Qatari lender offered more than $2.20 a share for a majority 55 per cent holding and indicated it would buy the remainder of the bank in stock.

The deal looked well on track, with the Bahraini bank's second largest shareholder, Kuwait's Tamdeen Investment Company, asking the AUB to open its books so that the IBQ could carry out due diligence. But the AUB resisted this move and demanded that a neutral third party, and not the IBQ, carry out the inspection in case its interests were 'violated' if no agreement was reached.

The IBQ was not prepared to give way on undertaking the study of the AUB's books itself and now the deal looks dead and buried. Indeed, Tamdeen, acting as an official spokesperson for AUB's shareholders, has gone so far as to inform Kuwait's stock market that the IBQ's offer has actually been rejected.

Several other Gulf based banks were rumoured to be waiting in the wings if the IBQ bid ran aground and its failure to seal the deal will be a major disappointment for the Qatari lender. The AUB is a prominent financial institution with sizeable stakes in a number of foreign banks, including Oman's Alliance Housing Bank, the Bank of Kuwait and the Middle East as well as the IBQ's Qatari rival, the Ahli Bank.

From Jordan to Syria

But while the IBQ has seemingly missed out on its prize, the Qatar National Bank's acquisition strategy, albeit fairly modest at this juncture, has proved more successful - with the QNB snaring a 20.6 per cent stake in Jordan's Housing Bank for Trade and Finance (HBTF) for $442m.

The HBTF, with 96 branches throughout Jordan, is the kingdom's biggest retail banking provider and it earned a net profit of $133.7m in 2006. The QNB has bought into the bank as it not only sees genuine potential in the Jordanian financial sector, but it also regards the purchase as a means of diversifying its income and building up its future financial power.

There is little doubt that the HBTF deal is unlikely to be the last for the QNB. It recently secured a huge loan of more than $1.7bn from a group of international lenders and Ali Shareef Al Emadi, the QNB's Group CEO, said the facility would be used to support the bank's 'aggressive growth' policy.

Some of the cash may well go towards establishing the joint Qatari/Syrian bank in Syria for which it has received preliminary approval. The QNB will retain 49 per cent of the bank's shares while Syria's General Institution of Social Insurance will hold 10 per cent, Syria's Saving Bank three per cent and the Popular Credit Bank 2.5 per cent. The remaining shares will be floated in an IPO in Syria. As with its move into Jordan, the QNB sees the Syrian market as offering serious potential.

Expand to succeed

The finance sector in the Middle East, and the Gulf in particular, is becoming increasingly competitive and many lenders are determined to consolidate and enhance their place in the top tier of regional banks through forceful expansion strategies.

Banks from right across the GCC, including the National Bank of Kuwait, the Commercial Bank of Kuwait and Saudi Arabia's National Commercial Bank have all either made recent acquisitions or openly stated an intention to do so very shortly. The IBQ and the QNB seem equally focused on making sure they do not get left behind in the rush.

See also:
Al Khaliji: the latest bank to hit Qatar

The QNB goes from strength to strength