Qatar Islamic Bank may use sukuk funding for M&A

DOHA: Qatar Islamic Bank (QIB) could use future sukuk issues to back a potential acquisition, its chairman told Reuters on Monday, after shareholders approved increasing the amount it could raise from issuing Islamic bonds.

The Gulf state's largest sharia-compliant lender won approval at its annual general meeting to double its sukuk programme to $3 billion, as well as retaining the mandate to issue 3 billion riyals ($824 million) to enhance core capital.

QIB was fine with its capital reserves at present, its chairman said as the bank had a total capital adequacy ratio -- a key indicator of a lender's health -- of 14.1 percent at the end of December, above a minimum requirement of 12.5 percent.

"We want to have it approved so at a later stage when we need it, probably for an acquisition, it is available and can be used," Sheikh Jassim bin Hamad al-Thani told Reuters on the sidelines of the meeting.

Sheikh Jassim would not comment on acquisition plans. He said the bank would prefer to issue sukuk locally but could sell to international investors if this was not possible.

A number of Qatari banks have pursued overseas acquisitions in recent years to diversify from a highly-competitive domestic market where 18 banks serve just over 2 million people.

In December Qatar National Bank said it had reached agreement to acquire Finansbank for $2.95 billion, while Commercial Bank of Qatar bought a majority stake in Alternatifbank in 2013.

QIB entered talks to acquire Turkey's Bank Asya in March 2014, only for negotiations to break down in July.

LENDING

Loan growth for QIB would be "moderate" this year, Sheikh Jassim said, noting "the market condition is not the same as we had last year and the year before".

Total lending extended by QIB reached 87.2 billion riyals at the end of December, up 46.1 percent on the same point of 2014, according to results published last month.

Lending growth in Qatar has been a key driver of banks' profits in recent years, propelled by government spending on infrastructure ahead of the state hosting the 2022 World Cup.

However, the impact of lower hydrocarbon prices on the state budget -- Qatar is forecast to post a 46.5 billion riyal deficit in 2016 -- is expected to crimp government spending, which will have a knock-on effect in the wider economy.