Qatar National Bank (QNB), the country’s largest lender, signed a $ 1.8bn, three-year loan which was expanded from its original amount after attracting strong demand from banks during a marketing period, it said yesterday.

Originally $ 1.5bn but increased after it was oversubscribed during the syndication period, the loan saw 10 banks join the five original book-runners on the deal, a source with knowledge of the matter said.

The significant interest in the facility from banks comes despite the loan paying a margin of just 1% over the London interbank offered rate (Libor) per annum, a figure which would be below the cost of funding for many banks on the deal.

“It’s very much a relationship deal and the people who have come in either have or want to build a relationship with QNB,” said a separate source, a London-based banker.
The loan was initially marketed by Bank of Tokyo-Mitsubishi UFJ, Deutsche Bank, HSBC, JP Morgan and Standard Chartered, who all originally pledged to contribute $ 300mn each.

Their commitments have been scaled back following the syndication, the source with knowledge of the deal said.

The transaction was launched to other banks in June, sources told Reuters at the time, and would replace an existing $ 1.85bn facility maturing on July 22.

Those joining the deal are Bank of China, DBS Bank, Mizuho, National Bank of Abu Dhabi , Bank of America-Merrill Lynch, Bank of New York Mellon, Barclays, Citi, Sumitomo Mitsui Banking Corp and Commercial Bank of Qatar , the source added.

Most bank fundraisings in the Gulf this year have come in the bond market because regional financial institutions have tried to take advantage of historically low interest rates to diversify away from bank credit lines and secure longer-term funding.
QNB itself priced a $ 1bn five-year bond in February.

Meanwhile, Germany’s Commerzbank has said QNB demonstrated an impressive growth record and remains well positioned to benefit from Qatar’s large-scale infrastructure projects.

QNB registered a 35% compound annual growth loan rate over the past five years, said the Commerzbank initiating coverage on Qatar’s largest lender.

The bank remains well positioned to benefit from the government’s $ 225bn planned infrastructure projects over the next five years, according to it.

“QNB’s dominant market position is viewed as a competitive threat by the other banks and further domestic expansion may trigger regulatory intervention at some later stage. However, we see no major risk on its business model over the medium term.” Commerzbank said.

QNB’s net loan book surged by 47% in 2011 and advanced by another 21% during the first six months of 2012 fuelled by strong lending to government-related agencies.

“We expect QNB’s loan book will grow in excess of 35% in 2012 outperforming the sector average,” it said, adding the bank’s credit portfolio is highly concentrated to the government and quasi-sovereign sectors which account for a significant 65% share of total loans while 90% of lending is domestically focused.

Highlighting that the liquidity cushion is tightening but remains comfortable, Commerzbank said the share of liquid assets as a percentage of total assets declined to 26% as of end-June 2012 from an average of 34% during the 2008-2011 period as QNB released excess liquidity to fund growth.

QNB’s loan to deposit ratio has historically remained below the 100% threshold and stood at 97% as of end-June 2012.

QNB maintains good access to foreign capital markets as it had successfully issued a $ 1bn eurobond due 2017 at a coupon of 3.375% under its recent $ 7.5bn euro medium term note programme. In addition QNB has an outstanding $ 1.5bn eurobond due 2015.

“We believe QNB should continue to have good access to both the international and local markets as it is considered one of the best quality Qatari credits,” it said.