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.

Seiz­ing op­por­tu­ni­ties

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

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