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For Qatari residents: Do you prefer a summer or winter World Cup 2022?

Banking on growth opportunities

Written by  Author |   Wed, 30 January 2013 13:13

Qatar's banking sector is set to witness exponential growth in 2013 and beyond. Such a forecast is backed up by the issuing of new regulatory frameworks and the gearing up for the unprecedented wave of projects and population growth leading to the 2022 FIFA World Cup and the 2030 vision.

Economic growth and the banking sector

Qatar's banks are seeking a bigger piece of the pie in the form of project funding as developers look to finance projects. The country is keen on investing in infrastructure to sustain its economic growth which led to opportunities in the areas of funding infrastructure projects that could exceed the $130 billion mark before the 2022 soccer World Cup.

According to recent analysis by Qatar National Bank, Qatar recorded the highest broad money supply growth in the region in 2011 as its M2 grew by 17.1%. Qatar's M2 also grew by 17.1% in the first eight months in 2012 reaching $101 billion. Such growth in money supply led to excess in domestic liquidity driving Qatar's Central Bank to issue treasury bills in May 2011 to help build the Qatari riyal yield curve.

The Qatar National Bank, which is controlled by the Government, is Qatar‘s and the MENA region's leading financial institution and the largest lender in the Gulf state with a stock market value of about $26 billion. QNB posted an 11 percent increase in third-quarter profit as lending climbed according to a Bloomberg report in October 2012. Net income rose to QR2.11 billion ($580 million) from QR1.9 billion a year earlier, the Doha-based lender said in a statement posted on the Qatar Exchange. Beltone Financial estimated a profit of QR2.27 billion, while EFG-Hermes Holding SAE forecast at QR2.11 billion, according to data compiled by Bloomberg.

Vying for a slice of the pie

Qatar National Bank, Doha Bank and Ahli Bank are few of the Qatari financial institutions that are seeking to fund the $130 billion of infrastructure the country needs before hosting the 2022 soccer World Cup.

Financing construction and management projects has become one of the core activities of Qatari banks in the recent years as new construction projects are planned. Banks are looking forward to lending a new $36 billion metro in Doha and rail network that is underway in 2013 in addition to the construction of $9 billion worth of sporting facilities including nine stadiums.

The lending competition is for financing mega-projects within the Qatari government's 40 percent allocation in its budget between now and 2016, including a $5.5 billion for a deepwater seaport, $ 20 billion for roads and a $ 17.5 billion new airport. A 490 km rail line linking Saudi Arabia and Bahrain through Qatar as part of a planned regional network is also underway.

According to Central Bank data, credit facilities issued by Qatari banks, including loans, increased by 33% in August from a year earlier, with lending to the public sector surging 65% and lenders' ratio of credit to loans widened to 114% in August, from 105% a year earlier.

Islamic banks and sukuk getting popular

Launching new sukuk programs are contributing to Qatar's economic growth, both locally and internationally. Qatar Islamic Bank (QIB), the Gulf state's largest Islamic banking institution, was successful in launching the first tranche of its new sukuk program. According to reports released by QIB, the bank has gained a net profit of QR 1.13 billion, which is a 2% increase from the same period last year. QIB's total assets as of September 2012 reached QR 66.8 billion, 26.7% greater than the same period in 2011. Its asset growth owes to its financing operations, gaining QR 38.1 billion, up 42% (QR11.3 billion) in the same period last year.

In line with the strong growth of Qatar's economy, Qatar International Islamic Bank (INTERNATIONAL ISLAMIC) has maintained its strong growth as 2012 third quarter results confirm the bank's financial growth across the balance sheet. The bank reported that its net profit for the period reached QR 531 million compared with QR 504 million in the same period last year, representing a growth of 5.4%.

Expanding Overseas

Qatar offers one of the fastest growing markets for financial products and services across the region. Qatari banks are diversifying their assets with business in the region by capitalizing on the opportunities to establish strategic alliances and partnerships with regional banks to participate and finance the investment and business opportunities.

The sovereign wealth fund Qatar Investment Authority (QIA), spends billions of dollars on overseas acquisitions and regional investments. Qatar National Bank is planning a five-year plan to be the Middle East and Africa's icon through expansion and diversifying its income sources. The bank has doubled its stake in Dubai-based Commercial Bank International, bought stakes in Iraq's Mansour Bank, Libya's Bank of Commerce & Development, and Morocco's Union Marocaine des Banques .QNB was recently planning to buy the Egyptian arm of French lender Societe Generale.

As for Doha Bank, Qatar's fourth largest lender by assets, it is expanding regionally to attract deposits and benefit from the region-wide spending boom. Doha Bank has operations in Qatar, Kuwait and the United Arab Emirates and is recently eyeing to open in other Arab Gulf countries.

Recruiting International Expertise

The global aspirations of Qatar's financial institutions have driven these institutions to recruit high profile foreign bankers to manage and develop Qatar's growing network of investments. These widely experienced professionals will lay the ground and pave the way for Qatari youth to take up future high financial position to service Qatar's fast growing economy and to move its financial sector forward.

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