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QNB Net Profits Rise 24 Percent in Q2 While Banks in UAE Agree to Substantial Loan for Dubai Towers and Research Praises Fiscal Position of Gulf States


Middle East : 19 July 2013

Net Profits Up for QNB

Qatar National Bank (or QNB) posted an increase of 24 percent for net profits in the second quarter, beating forecasts by 7 percent. The lender also announced that it will open an office in China.

QNB recently completed a transaction involving a majority stake in NSGB, the Egyptian branch of Societe Generale. The lender posted QT 2.6 billion (or $714 million) in net profits for the period from April 1 to June 30, 2013, including NSGB.

Net profits for the first half of this year reached QR 4.7 billion, a Y-O-Y increase of 15.1 percent. Total assets increased by 30.4 percent since June 2013, reaching a new high of QR 431 billion and resulting from robust growth in advances and loans.

Advances and loans were up by 26.3 percent, hitting QR 296 billion, with the non-performing to gross loans ratio reaching 1.5 percent.

Qatar Investment Authority partially owns QNB, which reports a market value of around $26 billion, allowing the lender to obtain the required approvals for opening a Chinese office. QNB will also begin operations in India during Q3.

QNB acquisitions have been mainly in North Africa and the Middle East. In December 2012 the lender announced intentions to acquire a majority stake in a leading Turkish bank.

QNB aims to have international business accounting for around 40 percent of profits and 45 percent of overall assets by the year 2017, according to CFO Ramzi Mari. QNB already owns stakes in Indonesian, Jordanian and Tunisian banks, and international businesses accounted for 17 percent of net profits and 30 percent of total assets before the purchase of NSGB.

Former chief executive Al al-Emadi was given the finance minister post in a recent government reshuffle, leaving the QNB position open. The lender recently gave the chief executive position to Ali al-Kuwari, the previous leader of QNB’s corporate, international and retail banking departments. Emadi was appointed as chairman of the board at QNB.

Triple Tower Development in Dubai to Receive Loans from UAE

A loan facility worth $245 million was signed by two UAE banks to fund construction on a Dubai real estate development involving three towers on the main thoroughfare of the emirate.

Over the last few months, signs of recovery have been spotted in the real estate sector of Dubai, as indicated by rising prices and the announcement of new projects. Prices fell by over 50 percent from the high levels seen in 2008.

Emirates NBD out of Dubai and the First Gulf Bank out of Abu Dhabi have provided funding for the Burj Al Salam development to developer Abdulsalam Al Rafi Group.

The development is located along the multi-lane highway running through the middle of Dubai, and plans include residential and commercial towers, along with a hotel run through the Sheraton name.

Two of the three towers are scheduled for completion in September. The hotel is scheduled for completion in March, according to recent statements.

Financing terms were not disclosed. It was announced that the two banks will split the loan equally.

Gulf States Maintain Strong Fiscal Position

According to Capital Economics of London, the Gulf states enjoy an “extremely strong” fiscal position, although spending must slow for 2014 to 2015 due to the level of oil prices.

The report noted that a fiscal crisis remained “highly unlikely” and governments will be able to avoid tightening their policies. Most governments in the Gulf region have no debt and massive savings accounts in sovereign wealth funds, allowing the governments to run deficits for years, according to the research.

Bahrain runs government debt at about 35 percent of GDP, but there continues to be room further government spending, although that spending must be kept to a slower pace. Due to these conditions, fiscal policy will not support growth as it has in the last number of years.

Government spending currently focuses on current expenditures, as opposed to capital expenditures. Some analysts state that the higher levels of oil prices in recent years were somewhat wasted, because investments were not increased to boost potential growth.

Despite this, Capital Economics claims that break-even oil price levels have remained above the level that would threaten the region’s fiscal sustainability.

Bahrain poses the greatest problem, according to the report, although this problem is relatively small considering the government maintains the ability to boost spending and run a deficit for several years into the future.

According to the report, rising spending and declining oil prices should result in deteriorated fiscal positions across the Gulf, with the possibility of Saudi Arabia needing to run a deficit by 2015.

Although weaker fiscal positions should not prompt tighter policies, the condition could result in governments scaling back the rate of spending increases. Slower growth is expected for the Gulf over the coming three to five years.

A senior banker from Capital Economics expressed the views of this company earlier in 2013.

According to Doha Bank of Qatar, the minimal price of $60 per barrel was noted in the fiscal budgets of each member state.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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