Qatari banks spread wings in UAE
Qatari banks are diversifying across borders, especially in the UAE, to gain scale and offset the effects of competition in their home market.
All major banking players in the country have announced expansion plans in neighbouring GCC states. Qatar National Bank opened branches in Oman and Kuwait last year, while Doha Bank has just opened an office in Kuwait after setting up a branch in Dubai.
Commercial Bank of Qatar currently holds just over a third of National Bank of Oman and about 40 per cent of UAE's United Arab Bank. And late last year, Al Khaliji Commercial Bank sealed a deal to purchase the UAE business of BLC Bank France, which is present in four of the emirates.
"The local market is saturated so we have to look into other markets for expansion," Raghavan Seetharaman, Doha Bank's Chief Executive, told Emirates Business. "Although market conditions have turned sour in the past few months, we are still looking at acquisition options in Asia and the US."
Seetharaman said Doha Bank, Qatar's fourth largest by market value, would be spending $300 million (Dh1.1 billion) on acquisitions this year. The bank, which recently opened representative offices in Bucharest and Romania and a branch in New York, planned to expand in Houston and Washington.
Al Khaliji, which rolled out its corporate business and listed its shares on the Doha Securities Market last year, is awaiting final approval from the UAE authorities for the BLC Bank acquisition. Al Khaliji plans to totally integrate BLC's UAE assets into its operations and rebrand it as Khaliji, CEO David Proctor told Emirates Business.
Al Khaliji has received a licence from the Dubai International Financial Centre (DIFC) for non-banking activities in the UAE. A new company, Al Khaliji Services, has been set up at the DIFC to oversee all non-banking operations.
"We are focusing on expanding our own brand," added Proctor. "The BLC Bank has worked in the UAE for a long time and has a good customer base, so our strategy will focus on expanding this base through opening new branches in the UAE. The bank has a strong presence in Dubai and we see high potential business in other emirates, especially Abu Dhabi, Sharjah and Ras Al Khaimah."
Leading Qatari banks appear to be facing increasing competition from foreign rivals – including those recently established in the Qatar Financial Centre – in the corporate banking, project finance and wealth management areas.
Products with large transaction sizes and fee-driven services, catering to the needs of high-net-worth individuals, have become highly profitable, says a report by Bank Audi. This has resulted in banks seeking new clients – increasing competition in Qatar. In addition the regulator's decision to allow conventional banks to offer Islamic services through separate windows is providing competition to the three full-fledged Islamic banks.
"Such developments are providing the sector with all the needed requirements to expand both internally and externally, and increase further the visibility of operating banks on the regional banking chessboard," says the report.
The Qatari banking sector has benefited from the country's stellar economic growth. Bank Audi figures show that all major banking aggregates posted high double-digit growth rates. The sector's size, measured by total assets, reached QR294.3bn (Dh296.8bn) at the end of 2007, up by 55.3 per cent from QR189.5bn at the end of the previous year. Customer deposits progressed by 38.8 per cent year-on-year from QR120.5bn in 2006 to QR16702bn in 2007.
"The substantial amount of liquidity in Qatar partly landed in the banking system to boost the liabilities side of their balance sheet and ensure funding of their activities," adds the study.
Banks in Qatar have increasingly used this inflow of funds to finance expansion plans and mega-projects. Credit facilities are becoming the main driver of activity, progressing by 56.6 per cent from QR102bn in 2006 to QR160.6bn in 2007.