JEDDAH, 29 December 2005 — The banking sector in Qatar is becoming highly competitive and challenging, as some foreign banks have started to increase their presence in the market.
According to the Kuwait-based Global Investment House (Global), the banking sector in Qatar saw a couple of significant mergers and acquisitions in 2004. National Bank of Kuwait (NBK) became the international shareholder of the erstwhile Grindlays Qatar Bank, which is now known as International Bank of Qatar (IBQ). NBK has a 20-percent stake in the capital of IBQ.
Bahrain’s Ahli United Bank (AUB) acquired a 40-percent stake in Al-Ahli Bank of Qatar and it has been renamed Ahli Bank QSC. Mashreqbank also plans to expand its foothold in the Qatari market.
“With these the banking sector in Qatar will experience a new dimension of competition in retail as well as institutional segments,” Global said in a statement.
In a major step for a Qatari bank, Qatar National Bank (QNB) went global and bought a key London-based wealth management group. The 135-million-pound deal acquired Ansbacher Holdings, a subsidiary of South Africa’s FirstRand, the country’s second largest bank by assets. The acquisition is a milestone for a bank in the Gulf Cooperation Council (GCC).
To tap the growing importance of Islamic finance, especially in the GCC region, many conventional banks are venturing into Islamic banking, which will further change the face of the banking sector in Qatar.
During the period 2000-2004, total credit facilities grew at a compounded annual growth rate of 14.2 percent to reach 49.5 billion Qatari riyals, while total domestic credit grew by 14.7 percent to 48.3 billion Qatari riyals. Almost all the sectors have witnessed double digit compounded annual growth rates in their credit off-take during 2000-2004.
During the first three quarters of 2005, total credit facilities of the banking sector grew by 27.1 percent to 62.9 billion Qatari riyals from 49.5 billion Qatari riyals at the end of 2004.
In Qatar, large banks such as the QNB, Doha Bank and Commercial Bank dominate the banking industry. The large banks also have competitive advantage over the smaller banks on account of their strong brand equity and distribution coverage.
In terms of assets, QNB has a dominant presence in the domestic banking industry, accounting for 47.1 percent of the total banking assets of the listed Qatari banks. In terms of total deposits, it accounts for 47.2 percent of total banking deposits of the listed banks. The bank held a 51.2 percent market share of net loans and advances.
Among the six listed banks, Commercial Bank held second position in terms of size of assets, customer deposits and loans and advances as of September 2005. The bank held a 19 percent market share in terms of assets, 18.5 percent in deposits and 16.5 percent of net loans and advances segment. Doha bank held third position in terms of all the three categories namely, total assets, deposits and net loans and advances with its market share at 13.1 percent, 12.3 percent and 12.2 percent, respectively.
Among the six local banks, Ahli Bank (ABQ) is the smallest bank in terms of asset size, deposits and net loans and advances with its market share at 6.2 percent, 6.7 percent and 5.1 percent respectively at the end of September 2005. The other two medium-sized banks are the two listed Islamic banks, namely, Qatar Islamic Bank (QIB), which held 8.6 percent of the total assets, and Qatar International Islamic Bank (QIIB) with the remaining 6 percent.
During the period 2000-2004, the total assets of the commercial banking sector grew at a compounded annual growth rate of 16.3 percent to 92.03 billion Qatari riyals in 2004 from 50.2 billion Qatari riyals in 2000. During the first eight month of 2005, the asset base further increased to 111.4 billion Qatari riyals.
The most significant part of the operations of the listed local banks in the last couple of years has been the increase in their profitability. The year 2003 saw the net profit of these banks increase by 28.8 percent, while in 2004 their net profit increased significantly by 41.6 percent. During the nine months of 2005, the net profit of the listed banks grew significantly by 97 percent year-on-year to 3.06 billion Qatari riyals.
