VZCZCXRO8350
PP RUEHDE RUEHDH RUEHDIR
DE RUEHDO #0369 1531231
ZNR UUUUU ZZH
P 021231Z JUN 09
FM AMEMBASSY DOHA
TO RUEHC/SECSTATE WASHDC PRIORITY 9115
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE

UNCLAS DOHA 000369 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN QA
SUBJECT: QATAR PRIMES LOCAL BANK LENDING 
 
REF: DOHA 135 
 
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(U) KEY POINTS 
-------------- 
 
-- Qatar announced 28 May its readiness to inject up to 
another USD 4.1 billion into local banks by offering to buy 
their real estate assets. 
 
-- This is the third time since October 2008 the GOQ has 
intervened in the local banking sector.  The government used 
its sovereign wealth fund, the Qatar Investment Authority 
(QIA), to take equity stakes in local banks last winter, and 
bought several large investment portfolios from the banks 
this spring. 
 
------------- 
(SBU) COMMENT 
------------- 
 
-- There is no authoritative data, but various commercial 
estimates indicate Qatar's residential real estate prices 
have dropped about 30 percent in Doha with land prices 
dropping between 40 inside, and 70 percent outside, the 
capital.  Bank lending to domestic real estate had all but 
dried up over the past few months, and the GOQ intends this 
intervention to prime more lending to the sector and across 
the economy. 
 
-- In the absence of formally declared guarantees and deposit 
insurance schemes, the GOQ announcement is a loud statement 
of support for the banks. 
 
-- A credit slowdown and real estate downturn 
notwithstanding, Qatar's economy is projected to grow at 10 
percent in 2009, an extraordinary figure, given the severity 
of the global downturn.  The goernment's large role in the 
economy and the strength of its balance sheets due to ramping 
hydrocaron exports is the primary reason for this growth. 
 
End Key Points andComment. 
 
¶1. (U) In announcng the move, Prime Minister Hamad Bin 
Jassim Al hani said the government would have a ceiling of 
5 billion Qatari Riyals (USD 4.1 billion) for buyig loans 
and the action is being taken "so that the banks can continue 
to play their vital role in the national economy and 
accelerate domestic growth." 
 
¶2. (SBU) Embassy's banking sector contacts hailed the GOQ 
announcement and view the intervention as helping to prevent 
problems with their balance sheets down the road.  It also 
appears that the Qatari action was taken on the government's 
initiative, and not in reaction to a clamor for help from 
local banks.  Details remain unclear - i.e., whether the GOQ 
or institutions will decide which assets to sell to the 
government. 
 
¶3. (SBU) Banks' real estate portfolios have grown quickly in 
recent years, though only 13 percent of total credit 
facilities are allocated to real estate, based on Central 
Bank figures from last year.  Moreover, banks are restricted 
from lending more than 15 percent of their total portfolio to 
the real estate sector.  A GOQ buyout of the banks' assets 
would free up their books to allow more lending. 
 
¶4. (U) The Doha Securities Market (DSM) responded positively 
to the news, jumping almost 6 percent on Sunday. 
 
¶5. (SBU) Embassy's banking contacts were less sanguine about 
the state of commercial lending, which remains a problem and 
the area most likely to see a rise in non-performing loans. 
In recent years, many banks (and borrowers) over-extended 
themselves via easy credit for personal loans. 
LeBaron