Within Global Investment House – Kuwait – latest Results Update on Doha Bank, we have highlighted the recent developments of the bank as follows:
Recent Developments
In June 2005, Doha Bank started Islamic banking services, ‘Doha Islamic’, to provide Islamic banking products and services to individuals, corporate and institutional clients across Qatar and in other GCC countries. The bank has ensured proper systems, procedures and product basket consisting of murabaha, Istisna, Iqra, Ijarat Manafea, Ijara Mintahia Bit-Tamleek and other Islamic products.
In May 2006, Doha Bank entered into a strategic alliance with IndusInd Bank, India, in line with its strategy to continuously improve and expand its product range catering to different customer segments. The alliance will help the bank to improve its product range such as wealth management and advisory services on investments, taxation, real estate and portfolio management services.
In 2006, Fitch Ratings has upgraded Doha Bank's Individual rating to 'C' from 'C/D' and has affirmed the Support rating at '2'. This rating action follows the improvements in Doha Bank's asset quality measures and profitability in 2005. According to Fitch, the Individual rating also reflects its well established domestic franchise, adequate capital position and sound liquidity. The Support rating reflects Fitch's view that, given Doha Bank’s size in a relatively small banking system and the willingness and ability of the Qatari authorities to maintain confidence in the system, there is a high probability that support would be provided by the authorities if required.
Apart from introducing Sharia compliant banking activities, the bank has extended and strengthened electronic banking services either by expanding branches and ATM network or strengthening banking services provided through internet and mobile phones in addition to expansion of e-remittances to new destinations.
During 2005, the bank launched many banking products like educational loans for both Qatari and non-Qatari and the “Welcome package” for expatriates newly coming to work in Qatar. New features have been added to PC loans to customers and the personal and car loans policies have been amended to include far better benefits for customers. Many promotional campaigns such as; the credit cards promotion, young savers club, salary transfer, the car loans and many other promotions targeting to encourage customers to make use of Doha Bank services, were launched during the year. The bank signed agreements with ING Banking Group, an internationally reputed Banking and Investment Activity Group, to offer investment advisory services, investment opportunities and private banking facilities to the customers.
As part of its overseas expansion plans, it is gearing up to open branches in India, Washington DC and London. It has plans to change its representative office in Dubai into a full-fledged branch. Plans are also afoot to set up representative offices in Singapore, China, Turkey and Japan. The bank also has plans to raise funds through bonds issue.
Financial Performance Review for FY2005 and Q1-2006
During 2005, the interest income of the bank increased by 55.9% to QR676mn from QR433.6mn registered a year before. In line with the hardening of interest rates, the interest expenses witnessed a significant y-o-y rise of 141.8% during 2005 to reach QR255.8mn. Despite the faster growth in interest expense as compared to interest income, the bank reported a growth of 28.2% in its net interest income to QR420.2mn in 2005. The increase in net interest income can be mainly attributed to the expansion in higher interest earning assets such as loans to and balances with banks and financial institutions. The bank is focusing on improving its revenue base from non-interest income which has been depicted in a y-o-y growth of 147.3% achieved in 2005. Its non-interest income was at QR591.6mn in 2005 as compared to QR239.2mn in 2004.
Due to the all round growth in net interest income (28.2%) and non-interest revenue (147.3%), the net profit attributable to shareholders was higher by 114.4% at QR789.9mn over QR368.4mn reported during 2004. With this its EPS moved up to QR11.4 per share in 2005 from QR9 in 2004. At the end of 2005, the total assets of the bank stood at QR15.2bn representing a y-o-y growth of 38.5%. Its gross loans & advances grew by 45.1% to QR9.1bn and it achieved a y-o-y growth of 36.6% in its customers’ deposit base to QR11bn. The quality of the bank’s asset portfolio is improving as its NPLs as a percentage of gross loans has been declining consistently since last few years. In 2005, it improved to 8.9% from 14.2% a year before.
During Q1-2006, net interest income of the bank registered a y-o-y growth of 31.3% to QR118.7mn. The bank reported a sharp y-o-y drop of 19.6% in its non-interest income to QR137.9mn. Its net profit grew by 14.2% on a y-o-y basis to QR212.9mn.
Outlook
Doha Bank’s strategies, which encompass its diversification into Islamic banking, pursue growth opportunities not only in the GCC region but also in other parts of the world and also raising of funds through bonds are in right direction. We maintain our earlier HOLD recommendation and value the bank’s stock at an intrinsic value of QR113.2 based on the Discounted Dividend Model and Peer Group Valuation Method. The intrinsic value arrived by us is at 8.3% premium to the current market price.
