13-Nov-2012
Volume9.Issue45
IFN Reports
Over-banked but under-capitalized
Amjad Hussain
There have been a number of reports in Doha recently looking at the state and performance of
the Qatar banking sector. It is widely believed that the Qatar market is over-banked. For a small
population of 1.8 million there are 18 banks: including four Islamic banks, seven domestic
conventional lenders and seven foreign banks.
It is therefore no wonder that we are seeing local banks expending a huge amount of effort in
launching new products and services. For example, Qatar Islamic Bank recently launched a new issue
of its Hemaya investment product series called Masaref. This is a three-year Shariah compliant
investment that offers invested capital protection at maturity and potentially for higher rates of return
for the capital invested. Barwa Bank, on the other hand, has launched Qotof, which are financial
packages, aimed to support small to medium enterprise growth in Qatar. These bundles are also
100% Shariah compliant and come in three flexible packages: Platinum, Gold and Value.
Local banks are also gearing up to compete for lending to the various infrastructure projects that are in
the pipeline: including US$36 billion for a rail network, US$20 billion for building roads, US$17.5 billion
for a new airport, US$5.5 billion for a deep water seaport and US$9 billion for the football stadiums
and sporting facilities for 2022 World Cup.
In order to meet the anticipated demand and to compete with international lenders, a number of Qatari
banks are looking to raise capital. The largest bank in the country, Qatar National Bank, at the end of
September had US$96.4 billion in total assets; the Commercial Bank of Qatar followed with US$21
billion.
Doha Bank is considering a GDR (global depositary receipt) issuance as a way of increasing its
capital. It seems like it will only be a matter of time before local Islamic banks also join the line to raise
funds.
Qatar International Islamic Bank surprised many observers by the success of its recent US$700 million
five-year Sukuk issuance, which was oversubscribed by more than seven times with an orderbook in
excess of US$5 billion. This seems to support the findings of a recent survey which suggest that the
global demand for Sukuk is more than half of the current supply.
The Qatar Financial Center (QFC) has launched a consultation concerning the proposed closure of
Islamic finance windows in the QFC. This news has been welcomed by many who feared that the
difference in approach between the QFC and the Qatar Central Bank regimes provided an opportunity
for regulatory arbitrage. The consultation is open to responses from the public until the 12th November
and a final decision is expected soon thereafter.
Amjad Hussain is a partner at law firm K&L Gates’ corporate and finance practices. He can be
contacted at Amjad.Hussain@klgates.com .
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