DUBAI: Commercialbank of Qatar (Cb), which is buying a majority stake in Turkish lender Alternatifbank, has picked two banks for a potential bond sale to boost its core capital, sources said.
The sale of a capital-boosting bond, a rare move in the Gulf, would help assuage analysts’ concerns over Cb’s capital position which have been exacerbated by its recent agreement to buy the controlling stake in Alternatifbank.
Cb, the Gulf state’s third-largest bank by market value, has hired Morgan Stanley Inc and Bank of America Merrill Lynch for the issue of a Tier 1 bond, two sources familiar with the matter said, speaking on condition of anonymity as the matter is not public.
Cb declined to comment.
Tier 1 capital is the main measure of a bank’s financial strength and Gulf banks will eventually be expected to comply with tighter Basel III global standards for Tier 1 ratios, which will be gradually introduced over the coming years.
The sale of capital-boosting bonds is still rare in the Gulf but the trend has been growing in recent months with two UAE-based lenders, Abu Dhabi Islamic Bank and Dubai Islamic Bank selling Shariah-compliant Tier 1 debt to shore up their capital ratios.
Cb has never sold a Tier 1 bond before but completed a $600m 10-year Tier 2 bond in 2009 as part of a $1.6bn two-part offering which, at the time, was the largest ever issue from an emerging market financial institution.
One of the sources said Cb was aiming to sell a benchmark-sized bond, which is typically at least $500m in size.
Dubai-based brokerage Arqaam Capital said in a March 26 note that the bank would need to raise fresh equity of about QR4.8bn ($1.32bn) in order to address its weak capital base.
The broker expects Cb to raise the capital through a combination of a Tier 1 bond sale and a rights issue. Reuters
