SOLID AND GROWING FRANCHISE
Qatar National Bank has a very strong banking franchise. It is the largest player in the Qatari banking sector, controlling around half of the country’s banking assets. In the region, it is among the fastest growing banks and is currently the fourth largest in terms of total assets as of the end of Q1 2010, following Emirates NBD, The National Commercial Bank and National Bank of Abu Dhabi.

COMPETITIVE ADVANTAGE IN THE STATE-RELATED BUSINESS
Due to the 50% ownership by the State of Qatar and to the bank’s large size, QNB has a competitive advantage in the government-related project finance business, where the capital base of the bank allows it to take part in big-ticket transactions that other smaller banks in the country cannot undertake.

EXPANDING REGIONALLY AND DIVERSIFYING ITS PRODUCT RANGE
Besides its organic growth in Qatar, QNB has continued to build its international network, with one of its main strategic initiatives being the expansion into new markets. In this regard, the bank has extended its branch network in the UK, France, Singapore, Kuwait, Oman and Yemen, and has acquired varying stakes in banks operating in Tunisia, Jordan, UAE and Iraq. In addition, the bank has established subsidiaries in Syria, Luxembourg and Switzerland. Also, to keep up with the growing competition, the bank is expanding its business lines, mainly by diversifying its product range for retail and corporate clients and by strengthening its Islamic Banking activities through its QNB Al Islami branches.

LOWER ASSET QUALITY CONCERNS
Unlike other banks operating in the region, QNB’s asset quality has remained sound during the latest crisis. Its NPL ratio stood at 0.77% and its NPL coverage at 108.8% at the end of 2009. Going forward, we expect the NPL ratio to increase to 1.12% and 1.15% in 2010 and 2011 respectively, and to average 1.07% between 2012 and 2014.

ROBUST EARNINGS GROWTH
During these times of uncertainty in the global financial markets, when banks’ earnings are made more volatile by the high levels of loan-loss provisioning, Qatar National Bank is well placed as it has better earnings visibility than its peer group. Despite an anticipated rise in credit provisioning during 2010, we expect its net income to grow strongly, achieving a yearly increase of 26.7% in 2010 followed by 21.3% during 2011.

ATTRACTIVE VALUATION
Despite the rise of 14.7% year-to-date in the share price, we believe the stock is still attractively valued, trading at 9.93 times our estimated 2010 EPS and 8.18 times EPS 2011 E. Consequently, we initiate coverage on Qatar National Bank with an “Accumulate” recommendation based on a 12-month fair value of QAR 163.31 per share, providing investors with 21.33% upside potential.