Qatar’s Doha Bank could issue a capital-boosting bond instead of shares as planned, although it was evaluating the best route to help raise core capital, its chief executive said.
The Gulf Arab state’s fifth-largest lender by market value had said in January it would hike its paid-up capital by 50 per cent, split equally between a local rights issue and a sale of global depositary receipts (GDRs) in London.
While the $426 million local cash call was completed in March, the expected GDR issue, which was due to be managed by JP Morgan Chase, has yet to materialise.
“The second part, we have multiple options. We can go for a GDR or for hybrid debt that is validated for Tier 1, or for a rights issue again to shareholders,” R. Seetharaman, the bank’s CEO, told reporters at an event in Dubai on Tuesday.
Hybrid debt could include perpetual bonds, whose lack of a maturity means they can count as equity and, therefore, towards a bank’s capital ratio.
“All these options are being contemplated and hopefully we should be in a position to resolve this during this year,” he said, adding the bank’s Tier 1 capital ratio was already above 15 per cent after the local rights issue.
Hybrid debt instruments which boost Tier 1 capital – a key measure of a bank’s financial health – are becoming increasing popular in the Gulf, given their competitive costs and the fact they diversify the investor base away from local shareholders.
Dubai’s largest lender, Emirates NBD, is meeting investors ahead of a possible Tier 1 bond, while Abu Dhabi Islamic Bank and Dubai Islamic Bank have both completed sharia-compliant Tier 1 sukuk in recent months.
Commercial Bank of Qatar has also picked banks to arrange a deal, sources said last month.
In terms of a regular bond issue, Seetharaman said the bank could “possibly” return to the market next year. The bank completed a $500 million five-year offering in March 2012.
Qatari banks have begun looking outside of the Gulf region for acquisition opportunities – Qatar National Bank and CBQ have bought businesses in Egypt and Turkey respectively – and Seetharaman said last month Doha Bank would look to double its foreign profits to 15 per cent of the total by 2015.
However, Seetharaman said on Tuesday it had no acquisition targets and was focused on regional growth, planning to launch corporate- and project-finance operations in the United Arab Emirates.
In the UAE, Dhs5 billion ($1.4 billion) has been earmarked for distribution in the next eight months as part of a $12 billion allocation to high-potential clients in the UAE, Kuwait and Qatar.