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9 December 2014


World Business Times is a leading global provider of business intelligence and insight

Fast changing face

of Qatar banking

Getting to grips with the Qatari market is not something that can be achieved on a fly-in visit. It takes time,

patience and a bit of effort. The rewards for those who are patient can be immense.

Pamula MacRan reports

BEFORE the global financial crisis it

seemed as if every bank in the Gulf

experienced year after year of record

breaking profits. Then it all came to a

halt with a screech and the return to the

good old days has been a long time

coming. But after five tough years it looks

as if the good times are finally back, if

QIB’s recent performance is anything to

go by. The bank reported a 16 per cent

leap in profits for the first nine months

of 2014 when compared to the same

period last year. QIB’s profit reached $310m

for the first 9 months of 2014 with total

assets up 29 per cent during the same period.

QIB’s story is not a long one, established

in 1982 as the first Islamic bank in Qatar it

has developed a reputation as something

of a pioneer of Islamic banking in both the

domestic and regional markets. The bank

is rated ‘A’ by Fitch and ‘A-’ by Standard

& Poor’s and boasts a 36 per cent share of

the Islamic banking market in Qatar, which

represents a 9 per cent share of Qatar’s

banking sector overall. QIB is also active

globally with an international presence in the

UK, Malaysia, Lebanon and Sudan.

The global financial crisis changed

everything, however, and these days

customers and regulators alike are often

more concerned about the overall strength of

a bank than its headline profit. Qatar is no

exception as banks grapple with stringent

new capital adequacy rules under Basel III

regulations. Bassel Gamal, group CEO of

QIB, sees little cause for concern in Qatar.

“Effective beginning 2014, all banks in

Qatar including QIB have adopted the Basel

III guidelines issued by the Qatar Central

Bank. These guidelines now ensure that the

capital adequacy framework in Qatar is in

line with the latest guidelines to be adopted

world-wide and captures key risks inherent

to the banking sector. These new guidelines

impose higher capital charges

on certain asset classes but

at the same time provide

additional clarity on definition

and qualification of various

capital items and instruments.”

Of course the shift from

Basel II to Basel III is not a

one-off event and requires

banks to be on their toes to the

constantly changing demands

on them. Gamal says, “The

new guidelines have raised

the minimum capital adequacy

level from 10 per cent to

12.5 per cent and the level is

expected to go higher from


and additional requirements

for Domestic Systemically

Important Banks. While these

requirements strengthen the

overall banking sector… we

need to be cognisant of these

requirements and accordingly

align our business and capital


In large part it is the

regulators in each jurisdiction

who are the ones wielding the

big sticks and making sure

that bank depositors and the

taxpayer never have to foot

the bill when the going gets

tough. This can affect all bank

products including those as

simple as the humble term

deposit. In some instances,

to meet the Basel III liquidity

standards, a depositor must

have no legal right to withdraw

deposits within the 30-day

horizon of the liquidity

coverage ratio. The result is the

introduction of term deposits that require a

minimum notice period of 31 days before

being able to be withdrawn by the depositor.

At the other end of the bank product

spectrum are contingent convertible (CoCo)

bonds and wipe-out bonds aimed both at

institutional and retail clients.

How long will it be before QIB and

other Qatari banks issue the new type of

hybrid securities or CoCo bonds that we

are seeing in other markets? “The new

QCB guidelines have now clearly defined

the eligibility criteria for various capital

instruments and provided the opportunity

for banks to optimise their capital structures

through issuance of qualifying hybrid capital

instruments including subordinated debt-

type instruments, perpetual additional Tier

1 and so on. These instruments will enable

banks to strengthen their capital levels and

offer additional protection to depositors and

creditors and at the same time improve return

on equity to common equity shareholders.

So in the medium term we expect more

Qatari banks to issue these forms of hybrid

capital instruments both in domestic and

international markets. However, the timing,

size and nature of instrument will depend on

the specific requirements of each institution

and prevailing capital market conditions,”

says Gamal.

Qatar’s currency, the riyal, is pegged to

the dollar and this can be both a blessing and

a curse depending on the phase of the credit

cycle. The recent prolonged low interest

rate environment globally caused by the

US Federal Reserve’s quantitative easing

programme has been blamed for the creation

of asset bubbles in the unlikeliest of places

but Qatar has been largely spared. Gamal

says, “Even though the Qatari riyal is pegged

to the US dollar, the monetary and interest

rate policies of Qatar have never mimicked

US interest rate levels and are more

influenced by domestic economic factors

including inflation and credit demand.

Interest rate levels in Qatar were historically

much higher than international and regional

markets and the gap has narrowed in the

last couple of years due to strong money

supply and surplus liquidity. These lower

interest rate levels have resulted in falling

profit rate margins over the last few years

through sharper contraction of asset yields

compared to cost of funding especially for

Islamic banks that have a larger share of low

and non-profit bearing deposits.”

For some observers in the west,

banking in the GCC is more about wealth

management than about lowly term deposits

and for a good number of banks it is. After

all, Qatar has one of the highest GDPs

per capita anywhere in the world and this

does mean that there is strong demand for

wealth management solutions. Banks like

QIB have already spotted this niche and

are committed to servicing it. “The scale

of the wealth management opportunity

across GCC markets is enormous… QIB

is currently providing investment products

and services including a suite of structured

products such as International Sukuk

Portfolio, Shiraa Fund of Fund, Hemaya and

so on in collaboration with our subsidiary

QInvest, the investment banking arm of

the QIB Group. The offering spans from

execution-only type of relationships to full

discretionary portfolio management.”

Off the back of the global financial

crisis, Islamic banking has seen an

impressive boom, which has played a

role in QIB’s recent growth. “From 2005

onwards the emphasis in the Islamic banking

industry as a whole has been to develop

advanced treasury services and innovative

asset management and investment banking

offerings. The Islamic financial markets are

becoming deeper and more liquid with more

issuers choosing to tap the Islamic markets

as a response to the indisputable demand

and renewed investors’ trust following the

events that led to the global financial crisis.

More and more Islamic financial instruments

are being issued, even by sovereigns and

conventional institutions. This in turn

is leading to increased development in

Shari’ah compliant investment vehicles.

International private banks are also gradually

entering the Islamic finance markets, as they

understand that this will be important to

their competitiveness especially in the GCC

region,” says Gamal.

The world’s banks are increasingly being seen as a

bellwether for the state of the economy: banks do well

when the economy is booming and badly when the

economy is tanking. Many of Qatar’s banks are seeing a

return to boom times and QIB is no exception.

Paul McNamara reports

QDVC is having a busy old time of late.

The company came into being in 2007 as

a joint venture between Qatari Diar Real

Estate Investment Company and VINCI

Construction Grands Projets from France.

The scope of the company is general

contracting and construction work, along

with associated services related to large

selected design and build public or private

projects, where it can add value. QDVC

also develops in-house engineering and

construction services for mega development

projects and attracts the input of local and

regional expert resources.

Its list of projects is extensive and

includes both domestic and international

projects. Within Qatar it is currently working

on the New Orbital Highway south west of

Doha, awarded by Ashghal (Public Works

Authority); the Doha Metro Red Line South

comprising the design and construction of

underground works below central Doha,

including five underground stations,; the

Sheraton Park Project in Doha’s Corniche

area; and two projects in the new city of

Lusail: the Light Railway transit System and

four underground car parks. Internationally

QDVC is currently building the Dahlak

Island Resort in Eritrea and the Golf &

Racquet Club in Al Houara, in the outskirts

of Tangier, Morocco.

In a nation that is witnessing such in-

credible growth it is hardly surprising that

the construction sector acts like a magnet

to overseas partners wanting a slice of the

action. But many of them have failed to

do their homework first. QDVC chairman

Nasser Al Ansari says, “There is a huge op-

portunity for investing in infrastructure in

Qatar and these should be explored by com-

panies from different parts of the world. But

unfortunately, a lot of international compa-

nies, when they send people to our country,

they send the wrong people who don’t have

the necessary knowhow. They don’t know

how to explore the country and how to con-

nect with the right people so as to form the

right perception about what is happening in

our country. They come here and they stay in

a hotel for three or four days, look around,

meet a few people and then leave.” This is

not the sort of strategy that is going to pay

dividends for the serious minded player.

Succeeding means doing the right re-

search, taking advantage of the right infra-

structure, spending sufficient time and not

trying to rush into getting a quick deal. Al

Ansari says, “Often they fail to make the

right forecasts. There is no proper feasibil-

ity study.”

QDVC, as a joint venture company, is a

prime example of how doing the right home-

work can pay real dividends. “When we put

the company together with two huge groups,

Qatari Diar on the one hand and VINCI Con-

struction Grands Projets on the other, a lot

of people thought that it was a quasi-govern-

ment initiative and that we would take over

by being granted projects because of who

we are and what we are. On the contrary,

we built the company on sound commercial

merit. We went out to compete and tender

and some of these tenders we lost and some

of these tenders we won. Today we have un-

der management QR20.5bn ($5.65bn US) of

projects in the last two years,” says Al An-

sari. An impressive achievement.

Al Ansari hopes that this kind of exam-

ple can act as a beacon for other firms wish-

ing to come to Qatar and achieve similar

goals. “This set a very simple example to

all the large international companies that we

are succeeding in Qatar because of how we

conduct business, our commitment to trans-

parency and that we were willing to spend

the past five years to build this company.

Because of such hard work we were able to

capture significant market share in Qatar.”

AgainAl Ansari comes back to the huge

importance of preparation in entering the

Qatari marketplace. “Taking advantage of

opportunities in Qatar is all down to sending

the right people with the right work ethic. A

lot of companies send people as if they are

on a vacation. They see how much they

can be entertained. They write back reports

to head office and say ‘oh that was fun, we

should stay’. In my experience the compa-

nies that have been successful are the ones

who took this country more seriously. The

ones that do not see it as an opportunity to

just work in a beautiful and fun resort des-

tination. But as an opportunity to participate

in building a state-of-the-art nation and then

they will get a chance.”

Because of the vast array of develop-

ment projects being undertaken in Qatar, the

opportunities are thick on the ground in al-

most every sector. QDVC’s core focus is on

construction and therefore it is not surprising

that Al Ansari’s initial thoughts spring to this

sector when outlining where the big oppor-

tunities lie. “Support and services to the con-

struction industry is an obvious area. There

is a real need for professional management

of labour communities and staff accommo-

dation. Facilities management, operation

and maintenance of equipment, supply of

equipment, supply of industries and technol-

ogies that will make the construction period

shorter, engineering of projects, technical

knowhow and support.”

QDVC itself has already shown how

it has been able to import technology and

expertise to help improve processes, which

permeate to other firms operating in the

Qatari engineering sector to save costs and

time. Al Ansari says, “One of the things that

we brought into Qatar was engineering kno-

whow. We are building complex projects be-

cause of our engineering knowhow that are

coming in under budget. In QDVC we are

building the train stations and giving solu-

tions to Qatar Rail, the company behind the

new state-of-the-art railway project that will

link Qatar internally and with its neighbours,

and their acceptance of these solutions led

to a cost saving in money and time.” More

specifically, QDVC aims at recruiting Qa-

tari talents, through a dedicated Qatarisation

Department created early 2013. The Qatari-

sation team is in charge of the recruitment,

training, motivation, retention and career

development of Qataris within the company.

They are committed to encouraging the de-

velopment of Qataris to become the future

generation of leaders, engineers and skilled

professionals. We believe that the success of

a Qatarisation strategy depends on a struc-

tured, comprehensive and holistic approach.

For this reason, we have developed several

initiatives that help us recruit and train Qa-

tari nationals.

International companies have to link

with the right Qatari partners for the real

benefits to be realised and they have to hire

Qataris within their organisations rather than

try to build standalone foreign companies

within Qatar. The danger is that standalone

companies can become dissociated from

Qatari society so they cannot fully under-

stand the supply chain of opportunities that

they can generate from being here in Qatar.

“There are a lot of young European couples

in Qatar who have come over and set up very

successful businesses by integrating into Qa-

tari society and understanding where they

can help supply the construction industry,”

says Al Ansari.

There is a natural cycle in the move-

ment of human resources internationally

where the clever and the entrepreneurial

tend to gravitate toward those areas that are

booming. Hardly surprising, then, that Qa-

tar is presently seeing a lot of interest. The

tricky bit is finding the right people at the

right level to talk to. “This is where overseas

embassies sometimes go wrong. You can-

not refer every entrepreneurial person from

Europe to a senior Qatari businessman. He

doesn’t have the time. They need to be in

contact with young entrepreneurial Qatari

men and women,” says Al Ansari. “Today

the government has this initiative called En-

terprise Qatar which has just merged with

Qatar Development Bank. Today anyone

wanting to come and set up a business here

needs to hear about the success stories and

how they tapped in to the Qatari market and

also the failure stories so that they can learn

what not to do or how to avoid mistakes.”

Al Ansari, however, has a keen interest

in importing not just top talent but modern

techniques, technology and insight. “Today

if you look at our construction industry and

how we build projects here, it is not exactly

how it has been built somewhere else. Still

there are a lot of conventional ways of

doing things and somebody could bring

knowhow to the industry to make it better in

quality, to build it faster, and in engineering

terms to use innovative solutions. Come

and tell us that you can design buildings

that are structurally lighter and cost less and

that we can heat and cool better by using

better design.”

Like every other senior Qatari business

figure, however, the notion of nation build-

ing is never far fromAl Ansari’s mind. “It is

not about promoting individuals. It is about

promoting Qatar. People need to come and

see what the business flow is and what the

deals on the table are.”

A talent

for business

Nasser Al Ansari, Chairman of QDVC

QIB headquarters in Qatar

Alwaseeta’s vision is to become a Middle East leading manufacturer and marketer for intermediate chemical and

non-hydrocarbon products. Committed to nurturing and encouraging innovative sustainable projects as well as

establishing local and international partnerships that will support the expansion of Qatar’s industrial base.

QDVC, as

a joint venture

company, is a

prime example

of how doing the

right homework

can pay real