Al Khaliji, Qatar's smallest bank by market value, plans to sell bonds this year for the first time, taking advantage of tumbling borrowing costs to support long- term infrastructure lending.
The Doha-based lender will raise "a little bit" less than the US$750 million authorized by shareholders, the bank's chief executive Robin McCall said. The average yield on financial services debt in the six-nation Gulf Cooperation Council fell 21 basis points, or 0.21 percentage point, this year to 2.86 per cent on February 22, after touching an all-time low of 2.75 per cent last month, according to the HSBC/Nasdaq Dubai GCC Conventional Financial Services US Dollar Bond Index.
"There's investor demand for appropriate paper in the market so I don't think it's a bad time at all at the moment," Mr McCall said. "We're at an all-time low in terms of interest rates." Al Khaliji is rated A- at Fitch Ratings, the seventh-highest investment grade.
Qatari banks raised $3.8 billion from the bond market last year, compared with none in 2011, as they stepped up lending to the government, according to data compiled by Bloomberg. The world's largest exporter of liquefied natural gas is planning to spend $138bn on investments by 2016 as it seeks to diversify the economy away from energy.
Qatar, which holds Standard & Poor's third-highest investment grade of AA, is planning to build a metro network, roads, hotels and stadiums as it prepares to host the 2022 soccer World Cup finals.
The nation's 11 domestic banks, which compete for customers in a country of 1.8 million, have relied on lending to public sector entities. Loans to that category accounted for 46 per cent of total credit facilities in December, up from 39 per cent a year earlier, central bank data show. Public sector loans jumped 47 per cent over the year, more than five times the growth rate for credit to private businesses.
"We're doing a lot of the infrastructure, supporting the infrastructure build-out in Qatar, which tends to be longer term and we need longer-term funding to support that," Mr McCall said. The bond sale will allow the bank to lengthen the "maturity profile on our funding book," he said.
Al Khaliji reported a 5 per cent increase in 2012 profit to 512m Qatari riyals.
* Bloomberg News