‘Overbanked’ Qatari market could benefit from more consolidation: Fitch

The merged entity will continue under the MAR brand, and Fitch believes the larger lender will be in a better position to offer financing for government projects. (Shutterstock/File Photo)
The merged entity will continue under the MAR brand, and Fitch believes the larger lender will be in a better position to offer financing for government projects. (Shutterstock/File Photo)
Short Url
Updated 02 February 2021

‘Overbanked’ Qatari market could benefit from more consolidation: Fitch

The merged entity will continue under the MAR brand, and Fitch believes the larger lender will be in a better position to offer financing for government projects. (Shutterstock/File Photo)
  • The deal will create one of the largest Shariah-compliant banks in the Middle East

DUBAI: Credit ratings agency Fitch has described the Qatari market as “overbanked,” and believes that lenders in the country could do with further consolidation.

On June 30, 2020, Islamic bank Masraf Al Rayan (MAR) and Al Khalij Commercial Bank (AKCB) confirmed they were in merger talks, and on Jan. 7 this year they confirmed an agreement had been reached.

The deal will create one of the largest Shariah-compliant banks in the Middle East, with combined assets of $47 billion as of Sept. 30, 2020.

The merged entity will continue under the MAR brand, and Fitch believes the larger lender will be in a better position to offer financing for government projects.

“This could further increase MAR’s exposure to government and government-related entities, which represented 47 percent of its financing book at end-3Q20, but would support the bank’s asset quality,” Fitch wrote.

The MAR deal is the second merger in Qatar between an Islamic bank and a conventional one, following that of Islamic bank Dukhan and the International Bank of Qatar (IBQ) in April 2019.

Following the deal, Fitch said Dukhan’s cost-to-income ratio decreased to 32 percent in the first half of last year, from 38 percent in 2018, after the bank realized 90 percent of its planned cost savings through the merger.

In a statement on Jan. 7 this year, MAR said its merger will achieve cost efficiencies in the region of 15 percent for the combined entity.

“Further Qatari bank mergers could generate cost synergies that alleviate pressure on profitability from compressed financing margins and higher loan impairment charges due to the pandemic,” Fitch said in its review.

It forecasts that more lenders may follow suit, and Qatar’s banking sector “could see more consolidation triggered by pressure on banks’ profitability from the coronavirus pandemic, particularly those with weaker franchises and limited pricing power.”

Commenting on the merger of MAR and AKCB, the latter’s Chairman Sheikh Hamad bin Faisal bin Thani Al-Thani said: “The combination of both banks will create increased scale, capacity and efficiency to allow us to support our diverse customer base and drive the enhancement of our product offering across the board. We are confident that this transaction will contribute to the development of the economy as a whole.”


Saudi Central Bank extends SME deferred payment program another 3 months

Saudi Central Bank extends SME deferred payment program another 3 months
Updated 8 min 25 sec ago

Saudi Central Bank extends SME deferred payment program another 3 months

Saudi Central Bank extends SME deferred payment program another 3 months
  • Program aims to support small and medium-sized enterprises still struggling due to the pandemic
  • More than 106,000 contracts have benefited since it was launched in March 2020 with a value of approximately SR167 billion

RIYADH: The Saudi Central Bank (SAMA) announced on Tuesday that it is extending a deferred payment program for a second time to help support small and medium-sized enterprises (SMEs) that are still struggling during the coronavirus (COVID-19) pandemic.
SAMA said the program — one of the bank’s initiatives to support private sector financing — will be extended for another three months from July 1 through Sept. 30.
The move is part of SAMA’s role in maintaining the stability of the financial sector, enabling it to promote economic growth and maintain employment levels in the private sector, especially within micro enterprises and other SMEs.
More than 106,000 contracts have benefited from the program since it was launched in March 2020 while the value of the deferred payments for those contracts has amounted to approximately SR167 billion ($44.5 billion).
SAMA has also offered a secured financing program for SMEs as more than 5,282 contracts have benefited from that program with a total financing value of more than SR10 billion, the bank said in a statement.
These programs are meant to support the private sector and the levels of liquidity in the financial sector. They enable financing agencies to provide support while mitigating the economic and financial effects on the SME sector, the bank said.
This is the second time SAMA has extended the two programs to support SMEs. It renewed the deferred payment program for three months last March, while it also extended the guaranteed financing program for an additional year until March 14, 2022.


Beirut is the world’s third most expensive city for expats

Beirut is the world’s third most expensive city for expats
Updated 22 June 2021

Beirut is the world’s third most expensive city for expats

Beirut is the world’s third most expensive city for expats
  • Living in the Lebanese capital as an expat has now become more expensive than living in Tokyo, Zurich, or Shanghai

DUBAI: Beirut has become the most expensive city for expats in the Middle East and North Africa region, and the third globally, based on the latest “Cost of Living” survey by consultancy Mercer.
Jumping 42 places in global rankings, Beirut has been at the center of Lebanon’s economic and political collapse, aggravated by the COVID-19 pandemic and the port explosion last year.
Living in the Lebanese capital as an expat has now become more expensive than living in Tokyo, Zurich, or Shanghai. Turkmenistan’s Ashgabat ranked first, in the list of most expensive cities for expatriates, followed by Hong Kong.
Mercer comes up with the annual list by comparing the cost of more than 200 items in each city, including housing, transportation, food, clothing, household goods and entertainment.
Riyadh has become the most expensive city in the Gulf at 29th globally. Jeddah ranked 94th, the report showed.
Dubai dropped to 42nd in the list, down from 23rd last year, and Abu Dhabi ranked 56th from 39th a year earlier.
Other cities in the Gulf also became more affordable this year, the report revealed, with Bahrain dropping to 71st from 52nd, while Muscat fell to 108th from 96th. Kuwait City dropped two places to 115th and Qatar at 21 places to 130th.


Dubai government agency first to approve job titles for remote work

Dubai government agency first to approve job titles for remote work
Updated 22 June 2021

Dubai government agency first to approve job titles for remote work

Dubai government agency first to approve job titles for remote work
  • Remote work can now be done under normal circumstances, the department said

DUBAI: Dubai Municipality has become the first government agency in the UAE to approve job titles for remote work, state news agency WAM has reported.
Remote work can now be done under normal circumstances, the department said, parallel to its other work setups such as its shifting system.
The move comes as the COVID-19 pandemic has made private, and even public, workplaces rethink ways to continue their operations despite the crisis.
Workplace innovation is not new to Dubai Municipality, as it pioneered flexible work systems for government departments in the UAE in 2007.
The pandemic has also made the municipality accelerate its smart transformation, to make the remote work system effective.


Mubadala-owned GlobalFoundries invests $6bn amid worldwide chip shortage

Mubadala-owned GlobalFoundries invests $6bn amid worldwide chip shortage
Updated 22 June 2021

Mubadala-owned GlobalFoundries invests $6bn amid worldwide chip shortage

Mubadala-owned GlobalFoundries invests $6bn amid worldwide chip shortage
  • Tuesday’s expansion is in addition to the company’s previously announced plan to invest $1.4 billion in 2021 alone to expand its manufacturing capacity

SINGAPORE: Chipmaker GlobalFoundries said on Tuesday it will spend $6 billion to expand capacity at its factories in Singapore, Germany and the United States amid a chip shortage that is hurting automakers and electronics firms globally.
The US-based company, owned by Abu Dhabi’s state-owned fund Mubadala, said it will invest more than $4 billion in Singapore, and $1 billion each in the others over the next two years. The unlisted company’s Singapore operations contribute about a third of its revenue.
“I think the next five to eight years, we’re going to be chasing supply not demand as an industry,” GlobalFoundries CEO Thomas Caulfield told a media briefing. He added that the company was prioritising automotive customers.
Tuesday’s expansion is in addition to the company’s previously announced plan to invest $1.4 billion in 2021 alone to expand its manufacturing capacity.
The chip shortage, which began in earnest in late December, was caused in part by automakers miscalculating demand for semiconductors in the pandemic. It was aggravated by electronics manufacturers placing more chip orders as work-from-home practices fueled a surge in sales of computers and other devices.
Large chipmakers including Intel Corp. have warned that the shortage will last well into next year. Intel announced in March a $20 billion plan to expand its advanced chip making capacity, while Taiwan’s TSMC said in April it will invest $100 billion over the next three years.
As well, governments, including those of the United States and Japan, have intervened to urge faster supplies. Earlier this month, the United States approved $54 billion in funds to increase US production and research into semiconductors and telecom equipment.
Caulfield said funding for GlobalFoundries’ expansion plan included investments from governments and pre-payments from customers.
The $4 billion investment in Singapore is the first of a phased expansion program planned by the company for the next five to 10 years, the CEO said. He did not specify a total amount.
The new Singapore fab will add capacity of 450,000 wafers per year, taking the campus’s total to 1.5 million, and the company expects to begin production in early 2023. Most of the added production will come online by end 2023.
The factory will make chips for cars and 5G technology, with long-term customer agreements already in place. It will add about 1,000 jobs in Singapore.


Sudan to abolish official customs dollar exchange rate

Sudan to abolish official customs dollar exchange rate
Updated 22 June 2021

Sudan to abolish official customs dollar exchange rate

Sudan to abolish official customs dollar exchange rate
  • The customs dollar exchange rate has been problematic for importers historically as it has valued the local currency at a higher rate

RIYADH: Sudan has taken the decision to abolish the official customs dollar exchange rate, Asharq Business reported, citing unnamed sources.
Sudan’s Finance Minister Jibril Ibrahim earlier pledged that the government was committed to canceling the so-called customs exchange rate used to determine import duties. It comes amid ongoing fiscal reforms that have been encouraged by the International Monetary Fund and other donors.
The customs dollar exchange rate has been problematic for importers historically as it has valued the local currency at a higher rate than reflected by the black market.
Ibrahim said the government would press ahead with its liberalization program until the country’s economy recovered from previous distortions.
He also said that the subsidy for wheat, cooking gas and fuel oil that is used in the production of electricity will not be canceled this year.
Devaluing the currency is one of a number of economic reforms that Sudan hopes will help it emerge from an enduring economic crisis.