THINK GLOBAL, ACT LOCAL
The appetite for snapping up assets abroad by Qatari banks is growing every year as they are looking at more mergers and takeovers. QatarToday finds out whether the decision has benefited them in terms of making profits.
The appetite for snapping up assets abroad by Qatari banks is growing every year as they are looking at more mergers and takeovers. Qatar Today finds out whether the decision has benefited them in terms of making profits.
While saturation of the local market is cited as the prime reason for the cash-rich Qatari banks to expand their operations overseas, seeking access to trade flows for higher growth opportunities across the Middle East region and also in Africa and Asia are said to be other.
Commercial Bank of Qatar's plans to acquire stakes in the Turkish Islamic bank Aysa fell through midway a couple of months ago but Qatar National Bank (QNB) has clinched the deal to buy 23.5% shares in the pan-African lender Ecobank in September. QNB was apparently enthused by the results of the acquisition of the Egyptian assets of two French banks in 2013 which helped the bank post a 13.7% increase in full-year net profit.
Commercial Bank has been operating in Oman, the UAE and Turkey through its subsidiaries and associates and all of them have been earning profits. The net profit of Alternatifbank (ABank) in Turkey rose by 29% to QR100.52 million (TL63 million) for the half year ending June 30, 2014 compared with QR76.59 million (TL 48 million) for the same period in 2013.
Likewise, the National Bank of Oman registered a growth of 22.8% by earning a net profit of QR217.58 million (OMR23 million) compared with QR177.85 million (OMR18.8 million) the previous year and the United Arab Bank's net profit stood at QR328.52 million (AED328.3 million) for H1 2014, representing an increase of 26.2% over the same period in 2013.
Pan- GCC presence
Doha Bank, which has, presence in several countries, has earned a net profit of QR37 million while the net income was QR162 million from its overseas branches during 2013 and the management is planning to expand internationally by opening new branches and representative offices. The bank is seeking to boost profits from overseas operations to as much as 30% of net income by next year, up from 10% in 2013. Doha Bank's net interest margins dropped to 3.1% in the second quarter, from 3.8% three years earlier.
The bank's latest acquisition is HSBC Oman's India operations in October this year while it has secured a licence to commence operations in India in the last quarter of 2013. The licence is expected to enable the bank to cater to the banking needs of not only the Qatari, GCC and Indian corporate sector but also support the global network of Doha Bank.
“Our aim is to become a pan- GCC presence, serving the bank's growing client base across the wider GCC region and leveraging our reputation in trade finance to expand into those countries with which Qatar (and other GCC countries in which the bank already has an established presence - notably Kuwait and the UAE) enjoy significant trade ties and other bilateral ties and synergies, including business flows and other ties such as expatriate accounts,” says Doha Bank Group CEO Dr Raghavan Seetharaman.
He says the bank will continue to focus on expansion in India as it has a “huge bilateral trade and development” not only with Qatar or GCC countries but also with most of the global locations such as Japan, China, South Korea, Singapore and Australia, where Doha Bank is already present.
Associate Director (CEEMEA Financial Services Ratings) at Standard and Poor's Timucin Engin says that, in tune with the overall trend for the GCC-based banks, certain Qatari banks have been establishing small branches and representative offices in Asia, to capitalise on the increasing trade flow between the GCC and Asia Pacific region.
For several years prior to the global economic crisis in late 2008, certain European banks have been acquiring or building up banking assets in emerging markets, including some of the MENA markets such as Egypt and Turkey.
“The banks in Europe are facing problems at home and are concentrating more on the domestic market to consolidate their position rather than looking at other countries and within this context they have been selling some of their non-core assets in other markets such as Turkey and Egypt, and bank valuations are visibly lower than the pre-crisis levels,” Timucin says.
Timucin also expects the credit growth in Qatar to remain strong over the visible future in line with the large-sized infrastructure investments and, given Standard and Poor's outlook on credit growth, he says the Qatari banks will remain important issuers of bonds and sukuks in the GCC markets.
Islamic banks not far behind
On the other hand, Qatar's Islamic banks too have joined the bandwagon and are looking to further improve their balance sheets by earning profits by opening new branches in other countries.
Qatar Islamic Bank (QIB) has acquired an additional 10% of the voting shares of Asian Finance Bank (AFB) for QR61 million which raised the total shareholding to 60% in May this year. AFB is registered as an Islamic bank in Malaysia and regulated by Bank Negara Malaysia, according to the bank's financial statement released in September this year.
The bank also acquired an additional 62.99% of the voting shares of Arab Finance House (AFH) and secured control over the financial and operating activities of AFH with 99.99% of the share capital in December last year. AFH is registered as an Islamic bank in Lebanon and regulated by Banque Du Liban.
Another leading Islamic bank - Masraf Al Rayan - has acquired over 98.34% shares of the Islamic Bank of Britain (IBB) in February this year and plans are underway to change the bank's name and brand to Al Rayan Bank, which is expected to be completed in January 2015.
Islamic Bank of Britain has made significant strides towards profitability by reversing monthly losses and is now profitable on a month by month basis since July 2014. The bank expects to end the year on a positive note.
Masraf Al Rayan is also planning to open a Knightsbridge branch and registered head office in London where it's commercial and GCC operations will be based. Its retail banking and operational centre, however, will remain in Birmingham.
IBB's balance sheet growth has also been strong, with retail property finance balances increasing by 61% by end of September. Growth was generated from IBB's full range of financial products including the Home Purchase Plan, Buy to Let Purchase Plan and Commercial Property Finance.
Asset growth of IBB has been funded through an increase of 29% in retail deposits and 20% increase in institutional wholesale deposits over the year to date. A widening of the margin over the total cost of funding has contributed significantly to the bank's improved financial performance, with net income from Islamic finance transactions increasing by 104%, according to Masraf Al Rayan's website