Valuations reflect the bank’s strengths: We are assigning Hold recommendations to the US$-denominated QNB Finansbank (QNBFB) senior bonds. We see ownership by QNB (QNBK), Qatar’s largest bank, and QNBFB’s recent performance as positives. Qatari ownership and the bonds’ ranking may mean that QNBFB bonds prove more resilient than most others in Turkey, if the market turns.
Further, while the QNBFB 6.875% 2024 bond has tightened versus the QNBK 3.5% 2024 security since it was issued, the indicative spread difference is still more than 300bps. Looking at the Bloomberg Barclays USD Emerging Market Index, the average spread difference between bonds rated low double-A (such as QNBK) and bonds rated high single-B (such as QNBFB) is about 300bps.
Our Hold recommendations on the QNBFB bonds primarily reflect valuations relative to domestic peers – the bonds are already quoted tighter than similar securities issued by larger Turkish banks such as Akbank and Garanti BBVA.