Currency Crisis Won’t Stop Qatar’s Soc Gen Buy

Qatar National Bank hopes to complete the purchase of Societe Generale’s Egyptian unit in the next two months and won’t be deterred by the currency crisis in the north African country, it said on Wednesday.

The Gulf state’s largest bank said in December it would buy the French bank’s 77 per cent stake in National Societe Generale Bank, with the buyout of minority shareholders taking the price to around $2.56 billion.

Egypt has subsequently been hit by a currency crisis, with the pound dropping around 6 per cent in value against the dollar to 6.58 since the introduction of a new system of foreign currency auctions on December 30.

“When we priced the deal, we went in expecting the exchange rate to drop – we expected 10 to 15 per cent and that is embedded in the deal,” Ramzi Mari, Qatar National Bank’s (QNB) chief financial officer, told an analysts’ call.

He added the bank wouldn’t withdraw its offer if the pound dropped below 7 to the dollar, equivalent to a decline of between 15 and 17 per cent.

Mari added any depreciation in the currency both before and after NSGB was formally purchased wouldn’t impact QNB’s profits.

QNB expects Egypt’s central bank to approve the purchase in the next two weeks, Mari said, with the buying process hopefully completed in two months and with NSGB consolidated into QNB’s accounts from the second quarter of 2013 onwards.

A tender offer to minority shareholders which control 23 per cent of NSGB’s stock must be completed under Egyptian market rules. No date for this has been announced but it is likely to be after central bank approval has been secured.

QNB is also targeting further acquisitions in north Africa and Turkey, but the bank had “nothing material happening” in terms of asset buys, Mari said, adding it had enough cash to complete a purchase without raising funds from the market.

The Qatari bank, along with Commonwealth Bank of Australia and Industrial and Commercial Bank of China, is said to be a suitor for Rabobank’s Indonesian unit, sources told Reuters on Wednesday.

Before including NSGB in its accounts, QNB expects net profit to rise 10 per cent in 2013, with loan growth around 15 per cent, Mari said. QNB reported on Sunday respective growth for 2012 of 11.1 per cent and 28.9 per cent.

The bank said at the time it would pay a cash dividend of 60 per cent of nominal earnings per share value, equivalent to 6 riyals per share.

Mari said the cash dividend was higher than the 35-40 per cent offered in previous years and would be an “exception” as the bank judged the right blend of cash and stock dividend.

QNB paid no bonus shares this year, a move that upset local investors which had expected a stock component – the share price suffered its biggest one-day drop in 12 months the day following the results announcement.

In terms of future dividends, Mari said the bank had the capital reserves to continue paying cash dividends above 40 per cent without threatening its capital position.

“Whether we pay 40-50 per cent, it doesn’t matter. Any time we need new capital, our biggest shareholder will be happy to put in new funds,” Mari said.

QNB is 50 per cent owned by the Qatar Investment Authority, the sovereign wealth fund which has led the bulk of the gas-rich Gulf state’s international acquisitions in recent years, including stakes in Barclays, carmaker Volkswagen and luxury store Harrods.