The unstoppable march of Qatar's banks abroad
(MENAFN- Gulf Times) The great confidence in the national economic boom thanks to the wise vision of His Highness Sheikh Tamim bin Hamad al-Thani, the Emir of Qatar, and the Qatari Government has led to the rapid development and growth of the national economy against global challenges and also contributed to the economic strength and increased investor confidence. The clear interest of our beloved country to pump large investments into various economic fields, and open the way for the private sector to grow and prosper is very impressive at the regional and international levels.
In my last article published in Gulf Times, we reviewed the economic integration between the Gulf Cooperation Council countries (GCC) to support their unity. Continuing to highlight the outstanding success of economic diversification in the State of Qatar, the success of the national banks abroad has contributed significantly to the government's smart strategy in promoting the prosperity of the private sector.
From just a handful of banks operating in Qatar in 1970s, to a total of 18 licensed by the Qatar Central Bank today, the number of banks in the country has grown substantially, making the Qatari banking sector one of the most competitive in the region.
Despite a prosperous domestic market, its relatively limited size has meant that Qatari banks have looked to expand internationally from almost the beginning to find additional growth opportunities.
The footprint of Qatari banks across the world is more than impressive for a country of Qatar's size. QNB has operations in more than 30 countries, operating in the Middle East, Africa, Europe and Asia. Commercial Bank subsidiary, Alternatifbank (ABank) in Turkey, holds interests in banks in the UAE and Oman. Doha Bank has branches in India and representative offices internationally. Al Khaliji bank has a French subsidiary and a network in the UAE. The list goes on.
The advantages of international operations for Qatari banks are substantial in that they diversify income streams and also diversify risk away from concentration in just one domestic market. Other advantages are harder to achieve and require an increased level of expertise and hands-on approach.
These are creating synergies by sharing knowledge among a banking group and creating economies of scale by combining core functionalities such as risk management, HR and Treasury together as one.
Although most Qatari banks have some form of overseas operations, they have expanded in different ways. Some have aggressively introduced their brand into international markets, with others buying significant stakes in successful overseas banks.
Geographic locations have varied too, ranging from emerging markets with large populations such as Turkey, India and Egypt to smaller markets but with established economic linkages such as the UAE and Lebanon.
Qatar's Islamic banks have other factors to consider when expanding abroad, most obviously establishing a presence where Shariah-compliant finance is already widely accepted.
Qatar Islamic Bank, for example, owns a subsidiary in Sudan and minority stakes in banks in Lebanon and Malaysia. What the banks do share in common is that this expansionary trend has until recently been driven by high levels of capitalisation amongst Qatar's banks, allowing them to successfully leverage their financial strength aboard. The large extent of Qatar-based banks' international operations can be seen as a reflection of their strength and also their confidence to compete with other banks globally. However, current economic conditions mean that the situation is very different today, with tightening of bank liquidity during this current period of low oil prices. The Qatar Central Bank, in its role as regulator, has ensured that Qatari banks' expansion has been in a prudential manner by fixing limits on the foreign currency gap and the ratio of foreign currency assets to foreign currency liabilities of each bank to a minimum of 100%.
Despite challenging times, Qatari banks still continue to expand their foreign operations. QNB acquired a near 100% stake in Finansbank in Turkey in June and is set to start banking operations in India, with other banks eyeing opportunities there too. This is indicative of the continuing strength and confidence of Qatari banks, which have invested abroad during good times and are now looking internationally to compensate for slower growth in Qatar.
Economic conditions have changed but the ambition of Qatari banks remains undiminished. Qatar, as a nation, has rapidly grown to a position of international importance and Qatari banks are making their mark on the world too with a seemly unstoppable expansion into foreign markets.
* Dr Abdulaziz A al-Ghorairi is senior vice-president & group chief economist and head of asset management, Commercial Bank.
In my last article published in Gulf Times, we reviewed the economic integration between the Gulf Cooperation Council countries (GCC) to support their unity. Continuing to highlight the outstanding success of economic diversification in the State of Qatar, the success of the national banks abroad has contributed significantly to the government's smart strategy in promoting the prosperity of the private sector.
From just a handful of banks operating in Qatar in 1970s, to a total of 18 licensed by the Qatar Central Bank today, the number of banks in the country has grown substantially, making the Qatari banking sector one of the most competitive in the region.
Despite a prosperous domestic market, its relatively limited size has meant that Qatari banks have looked to expand internationally from almost the beginning to find additional growth opportunities.
The footprint of Qatari banks across the world is more than impressive for a country of Qatar's size. QNB has operations in more than 30 countries, operating in the Middle East, Africa, Europe and Asia. Commercial Bank subsidiary, Alternatifbank (ABank) in Turkey, holds interests in banks in the UAE and Oman. Doha Bank has branches in India and representative offices internationally. Al Khaliji bank has a French subsidiary and a network in the UAE. The list goes on.
The advantages of international operations for Qatari banks are substantial in that they diversify income streams and also diversify risk away from concentration in just one domestic market. Other advantages are harder to achieve and require an increased level of expertise and hands-on approach.
These are creating synergies by sharing knowledge among a banking group and creating economies of scale by combining core functionalities such as risk management, HR and Treasury together as one.
Although most Qatari banks have some form of overseas operations, they have expanded in different ways. Some have aggressively introduced their brand into international markets, with others buying significant stakes in successful overseas banks.
Geographic locations have varied too, ranging from emerging markets with large populations such as Turkey, India and Egypt to smaller markets but with established economic linkages such as the UAE and Lebanon.
Qatar's Islamic banks have other factors to consider when expanding abroad, most obviously establishing a presence where Shariah-compliant finance is already widely accepted.
Qatar Islamic Bank, for example, owns a subsidiary in Sudan and minority stakes in banks in Lebanon and Malaysia. What the banks do share in common is that this expansionary trend has until recently been driven by high levels of capitalisation amongst Qatar's banks, allowing them to successfully leverage their financial strength aboard. The large extent of Qatar-based banks' international operations can be seen as a reflection of their strength and also their confidence to compete with other banks globally. However, current economic conditions mean that the situation is very different today, with tightening of bank liquidity during this current period of low oil prices. The Qatar Central Bank, in its role as regulator, has ensured that Qatari banks' expansion has been in a prudential manner by fixing limits on the foreign currency gap and the ratio of foreign currency assets to foreign currency liabilities of each bank to a minimum of 100%.
Despite challenging times, Qatari banks still continue to expand their foreign operations. QNB acquired a near 100% stake in Finansbank in Turkey in June and is set to start banking operations in India, with other banks eyeing opportunities there too. This is indicative of the continuing strength and confidence of Qatari banks, which have invested abroad during good times and are now looking internationally to compensate for slower growth in Qatar.
Economic conditions have changed but the ambition of Qatari banks remains undiminished. Qatar, as a nation, has rapidly grown to a position of international importance and Qatari banks are making their mark on the world too with a seemly unstoppable expansion into foreign markets.
* Dr Abdulaziz A al-Ghorairi is senior vice-president & group chief economist and head of asset management, Commercial Bank.
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