Doha Bank plans share sale in UK to raise capital

REUTERS

DUBAI DOHA BANK, Qatar’s fifthlargest bank by market value, is considering selling shares in London as part of a plan to boost capital by up to $1.6 billion in 2013, four banking sources said.

The lender, part-owned by the Gulf state’s sovereign wealth fund, may raise about a quarter of the capital through an issue of global depository receipts (GDR) on the London Stock Exchange, with the remainder raised through a local rights issue, two of the sources said, speaking on condition of anonymity because the matter has not been made public.

A GDR is a certificate represents a block of shares in a company. GDRs are often issued by firms in emerging market states to allow foreign investors to buy the stock more easily.

Doha Bank’s capital levels are lower than its Qatari peers and proceeds from the share issue are expected to be used mainly to help to plug that shortfall. “The bank needs to boost capital and that’s the main reason for the rights issue,” one Gulf-based banking source said. “If they end up raising more than a billion dollars comfortably, some of it could be used for expansion purposes.” Chief Executive R Seetharaman declined to comment on specific details of the bank’s plan but said that it is ultimately up to shareholders to decide on the capital increase.

The lender said last month that it could increase its capital 50 percent by the first quarter of 2013 to help to finance its expansion plans. It has a market value of about $3.2 billion. Arqaam Capital analyst Jaap Meijer last month said that Doha Bank’s capital base is “very tight”.

A rights issue with shares priced at a 30 percent discount will help to raise about 4.1 billion riyals ($1.13 billion), Meijer wrote in a research note, adding that the bank’s core Tier 1 capital ratio would fall to 9.6 percent by the end of 2013 without a capital increase.

At the end of March the bank’s Tier 1 ratio was 10.7 percent. Its capital adequacy ratio stood at 13.3 percent, against the Qatari central bank’s minimum requirement of 10 percent. Source said that a part-GDR offering by Doha Bank would make steep discounts unlikely.

Any plans to issue shares in London has to be approved by the Qatar central bank, sources said, adding that a previous plan to issue GDRs was put on hold by the regulator in 2009.

Doha Bank originally hired JP Morgan Chase for the 2009 issue, the four sources said.

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