Doha Bank says to cut construction exposure

Lender to keep UAE branches: CEO

DOHA, Dec 11, (RTRS): Doha Bank will cut its exposure to construction companies to 10 percent from 17 percent of lending in the next three years, its CEO said on Tuesday, part of efforts to adjust to a building industry downturn following a slump in oil prices.

CEO Raghavan Seetharaman also said the bank, Qatar’s fifth largest by assets, would maintain its presence in the United Arab Emirates despite a protracted regional rift.

The UAE, Saudi Arabia, Bahrain and Egypt began a boycott of Qatar in June 2017, accusing the country of supporting militants, which Qatar has denied.

Speaking from his office in Doha, Seetharaman told Reuters that assets in the UAE had been cut to around 2 billion dirhams ($544.5 million) from 5 billion dirhams before the start of the boycott in June 2017.

Doha Bank has a branch in Dubai and Abu Dhabi and it is reducing exposure to the UAE through asset swaps, sources told Reuters previously. This represents part of moves by some Qatari companies to trim exposure to the Gulf’s main financial and wealth centre since the rift.

Seetharaman said the bank would maintain its UAE presence despite the scaling back, which included about 50 job cuts last year from a total of about 92.

“If there’s a defusion of the crisis tomorrow we want to keep that option open,” Seetharaman said.

The bank’s loan growth for 2019 is expected to jump to 6 percent after being flat or only marginally up this year, the CEO said. He said overall loan growth in Qatar in general next year should be around 3 percent.

Seetharaman forecast loan growth for Doha Bank even though it plans to scale back exposure to building contractors over the next three years, with an aim of reducing it to 10 percent from 17 percent currently.

Contractors have been hit hard by the slump in the Gulf’s construction market as governments had to cut back on project spending following the 2014/2015 fall in oil prices.

“It is a deliberate attempt to bring down our contract exposure because in the region itself there’s a lot of systemic risk,” Seetharaman said.

Doha Bank has a $400 million loan due in January. When asked about refinancing plans he said: “We have already made arrangements. The money is coming in the second week of January,” he said, without providing further detail.

Seetharaman said the bank is exploring a number of different financing options for the coming year that include bonds, bilateral loans, and syndicated loans, but declined to provide the total amount of expected financing for next year.

Bankers have said they expect the tiny but wealthy country’s banking sector to see further consolidation after the merger of Barwa Bank and the International Bank of Qatar earlier this year. Qatar has 17 local and international commercial banks serving a population of only 2.6 million.

Seetharaman said that there were no current talks for a merger involving Doha Bank, though it remains a future possibility.

“Consolidation is an option for the medium and long term because with changes in the business model and regulations around the world, more capital is required,” he said.