Uncertainties about the immediate direction of Al-Ahli Bank of Qatarhave been settled by a decision which has restored the bank's capital, rejected an equity stake bid from National Bank of Kuwait (NBK)and brought in a new board of directors. The bank has reported break-even in 2001 after a large loss in the previous 12 months, and general manager Qasim M Qasim says 'promising' half-year figures are to be published soon.
At an extraordinary shareholders' meeting on 8 June, two options were presented by the Qatar Central Bank about how to eliminate a shortfall in bad loan provisions identified in 2000. This had been dealt with up to that point by a central bank agreement signed in April 2001 that guaranteed any potential shortfall in provisions up to QR 100 million ($27.5 million).
Shareholders voted to accept a central bank support payment of QR 100 million provided in a form equivalent to preferred stocks. Al-Ahli Bank is to service the payment with a yield of 3 per cent a year paid out of profits. The central bank has agreed that the support payment is only repayable from net profits when they are made, and that the bank can retain 10 per cent of net income. The payment does not have priority in terms of repayment over depositors' money, but it will have priority over common stockholders.
The second option, which was not accepted, called for Al-Ahli Bank to accept a strategic partner. NBK was nominated by the central bank. The bank's interest in buying Al-Ahli Bank was reported by MEED in February 2002 (MEED 1:2:02).
As part of the agreement with the central bank about the support payment, shareholders agreed to give up the right to elect the board of directors. On 11 June, the central bank announced a new seven-person board comprising four of the eight previous directors including chairman Saleh bin Mubarak al-Khulaifi and vice-chairman Ahmed Abdulrahman al-Mana, both elected in June 2001.
Al-Ahli Bank reported zero profit in 2001 in part because of the central bank's directive that it should make further substantial provisions. At the end of 2001, the bank had bad loan provisions of QR 302 million ($83 million). A note in the bank's financial statements says that the central bank required Al-Ahli Bank to make provisions equivalent to net profit for the year. This followed a loss of QR 102 million ($28 million) in 2000, principally as the result of having to make heavy provisions at the direction of the central bank.
The shareholders' decision to accept the support payment was welcomed by the market and gave a lift to the price of Al-Ahli Bank shares. They closed on 26 June at QR 32.5 ($8.9) compared with QR 30 ($8.2) at the start of the month.
Qasim said on 27 June that the board of directors is studying ways of eliminating non-performing loan problems and restructuring the bank. He also said that the possibility of a strategic investor is still being considered.
The central bank has imposed a restriction that no single customer should be advanced more than 5 per cent of capital. Qasim said that he believed this would soon be lifted. He also forecast a recovery in Al-Ahli Bank's fortunes. 'The year is looking very promising,' he said.