Qatar boosts bank stakes for the second time in two years

The Qatar Investment Authority (QIA) has acquired an additional stake in local banks in a move emblematic of the emirate's response to the financial crisis. Five banks yesterday said they issued new shares to Qatar's sovereign wealth fund worth 5 per cent of their existing capital. Commercial Bank, the country's second-largest lender, said it would sell more than 10 million new shares to the QIA, amounting to an investment in the bank of about 807 million rials (Dh813.9m) and raising the QIA's stake to 9.1 per cent. Doha Bank, the third-largest by assets, said it received 368m rials in the QIA injection. The capital increase follows a similar 5 per cent boost two years ago. The QIA began buying bank shares in December 2008 after announcing it would invest US$5.3 billion (Dh19.46bn) in local lenders to restore investor confidence and sustain project financing during the global economic crisis. The Qatari government has since bought portfolios of soured loans from its banks and introduced cheap credit facilities to encourage lending. The capital increases have remained the central pillar of its response to banking-system stresses. Through periodic investments in listed banks, the sovereign fund aims to increase lenders' capital by as much as 20 per cent. The announcement yesterday demonstrates "the government's support for the banking system in Qatar by further strengthening the capital ratios of the banks in order to enhance their ability to face the repercussions of the global financial crisis", the official Qatar News Agency said. "These measures have included the public capital injection into these banks with extensive liquidity support, in addition to a number of financial programmes aiming to strengthen the capacity of national banks to finance development projects." @Email:afitch@thenational.ae