Almost Half of Qatar’s Traditional Investor Base Has Cut Ties With the Country

Banks in the world’s wealthiest nation will need to offer more yield if they tap the market as almost half of their traditional investor base has cut ties with the country.

Qatar National Bank QPSC, Commercial Bank QSC and Doha Bank QSC are considering funding options that include loans, private placements or dollar bonds, people familiar with the plans said. But investors and analysts say the lenders will have to pay more to compensate for the region’s political risk to drum up interest.

Read More: QNB Is Said Among Qatari Lenders Seeking Funding Amid Spat

Saudi Arabia and other Arab nations severed relations with Qatar two months ago accusing it of supporting extremist groups, a charge it denies. That led to a drop in foreign deposits in June, the steepest in almost two years, and a record jump in the three-month Qatar Interbank Offer Rate.

Here’s what analysts and investors had to say about borrowing costs for Qatari banks planning to tap the market: 

  • While borrowing costs will rise, “the assumption of government support means yields won’t rise that much,” said Max Wolman, a London-based senior investment manager who helps oversee $11 billion in emerging-market debt at Aberdeen Asset Management Plc.
    • There could be interest from some Asian investors, given they were involved in some of the recent Middle East sovereign deals.
    • “If they look attractive from a yield perspective we could buy them. Currently we are very underweight Qatar” because the yields weren’t attractive
    • Looking at QNB’s dollar-denominated bonds due September 2021, the yields peaked at 3.8 percent and are currently around 3.1 percent, “so I would say a five-year at 3.5 to 3.75 percent would be attractive.” The yield on the bonds rose to 3.21 percent today, according to data compiled by Bloomberg.
  • Even if they offer “200 basis points over midswaps, I would not lend to them at this rate, as it will not cover for the risk of further…

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