Commercial Bank of Qatar bought a 75 per cent of stake in Turkey’s Alternatifbank.
Commercial Bank Of Qatar (CBQ), which is buying a majority stake in Turkish lender Alternatifbank, has picked two banks for a potential bond sale to boost its core capital, sources said.
The sale of a capital-boosting bond, a rare move in the Gulf, would help assuage analysts’ concerns over CBQ’s capital position which have been exacerbated by its recent agreement to buy the controlling stake in Alternatifbank.
CBQ, the Gulf state’s third-largest bank by market value, has hired Morgan Stanley Inc and Bank Of America Merrill Lynch for the issue of a Tier 1 bond, two sources familiar with the matter said, speaking on condition of anonymity as the matter is not public.
CBQ declined to comment.
Tier 1 capital is the main measure of a bank’s financial strength and Gulf banks will eventually be expected to comply with tighter Basel III global standards for Tier 1 ratios, which will be gradually introduced over the coming years.
The sale of capital-boosting bonds is still rare in the Gulf but the trend has been growing in recent months with two UAE-based lenders, Abu Dhabi Islamic Bank and Dubai Islamic Bank selling sharia-compliant Tier 1 debt to shore up their capital ratios.
CBQ has never sold a Tier 1 bond before but completed a $600 million ten-year Tier 2 bond in 2009 as part of a $1.6 billion two-part offering which, at the time, was the largest ever issue from an emerging market financial institution.
One of the sources said CBQ was aiming to sell a benchmark-sized bond, which is typically at least $500 million in size.
Dubai-based brokerage Arqaam Capital said in a March 26 note that the bank would need to raise fresh equity of about 4.8 billion Qatari riyals ($1.32 billion) in order to address its weak capital base. The broker expects CBQ to raise the capital through a combination of a Tier 1 bond sale and a rights issue.
In March, CBQ agreed to buy a 70.8 per cent stake in Alternatifbank, valued at $460 million based on Alternatif’s book value of $328 million at the end of December. The final price will be based on two times the Turkish lender’s book value as at June 30, 2013, the bank has said.
In the Gulf region, CBQ owns a near 35 per cent stake in National Bank of Oman and 40 percent in United Arab Bank.