Qatar banks seek Asian, European funding as diplomatic crisis bites

Dhaka,  Tue,  26 September 2017
Published : 25 Aug 2017, 00:39:25

Qatar banks seek Asian, European funding as diplomatic crisis bites

DUBAI, Aug 24 (Reuters): Qatari banks are turning to Asia and Europe for funding after clients from other Arab states pulled billions of dollars from their accounts following a regional diplomatic rift.

While the Qatari government has placed large deposits in its lenders to help offset the outflows, banks are trying to find new private funding as analysts warn there are likely to be more heavy withdrawals in the coming months.  

Two sources told the news agency that Qatar National Bank (QNB) has held talks, arranged by banks including Standard Chartered, with investors in Taiwan about a private placement of Formosa bonds - debt sold there by foreign issuers and denominated in currencies other than the Taiwan dollar.  

One of the sources added that QNB, which is the Middle East's largest bank, was also considering private placements in other Asian markets.

The lender has around $6 billion in bonds and medium term notes maturing between now and mid-2018, much of which it is likely to aim to refinance, the source said, adding that this was most efficient step in light of the rift.  

Qatar Islamic Bank, the country's largest Islamic lender, has recently raised funds through private placement deals in Japanese yen and Australian dollars.  

It is now exploring more such deals in Europe and Asia, as well as a certificate of deposit programme and a Murabaha - a cost-plus-profit Islamic facility - to raise cash, according to an international banker.

The bank did not respond to a Reuters request for comment.  A spokesman for QNB said: "We have several proposals for a Formosa issue from several international banks dealing in that part of the world."

However, he added that nothing had yet been agreed or decided on the timing of the issue or the choice of advisers.  "It is natural for QNB to regularly tap the different international markets maintaining close relations with its investor base as a frequent issuer.

This is part of the overall QNB's wholesale funding strategy agreed before the regional diplomatic rift," he said.

Many Qatari banks are facing greater urgency to secure funding since June when the United Arab Emirates, Saudi Arabia, Egypt and Bahrain imposed a diplomatic and commercial boycott on Qatar, accusing it of funding terrorism. Qatar denies the allegations.

The crisis has led to an outflow of around $7.5 billion in foreign customers' deposits and a further $15 billion in foreign interbank deposits and borrowings, believed to be mainly from those four Arab countries, Qatari central bank data shows.  

Analysts estimate a further $3 to $4 billion could leave in the coming months. In response, Qatar's government deposited nearly $18 billion with local banks in June and July, according to the same data.

The exodus of cash was a threat to liquidity and likely to increase competition among Qatari banks for deposits, pushing up funding costs and squeezing margins, Fitch Ratings warned on Wednesday.

Before the crisis, Europe was the largest source of total funding, including deposits and wholesale funding, for Qatari banks.

This was slightly ahead of clients in member states of the six-nation Gulf Cooperation Council, of which Qatar remains a member.

After a fall in government deposits in Qatar's banking system in 2016, banks reacted by attracting costlier non-resident deposits and increasing wholesale funding to sustain their growth.

Deposits represent 75 per cent of Qatari banks' non-equity funding, according to Fitch. Foreign customer deposits accounting for around a quarter of total deposits. 
Editor : A.H.M Moazzem Hossain
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