Qatar Islamic Bank benefits from change

Qatar Islamic Bank has spent the last month watching rival lenders fall at the first hurdle. But how long can its luck last?

Few lenders can claim to have had as much good fortune as Qatar Islamic Bank this year.

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Last Updated: June 6, 2011

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In the past month, not one but two putative challenges to its position have evaporated, leaving the country's largest Sharia-compliant lender in an enviable position. The bank's stockwas flat yesterday at 77 Qatari rials, as the QE Index fell 1.02 per cent to 8,156.60.

A planned tie-up between Al Khaliji Commercial Bank and International Bank of Qatar, now called off, would have created the third-largest bank in Qatar. That might not have been a problem for Qatar National Bank, the country's biggest lender, but the prospects for Qatar Islamic Bank (QIB) could have been different.

Meanwhile, a potential threat from HSBC Amanah, the Sharia-compliant arm of the British lending giant, is vanishing after HSBC Amanah said last month it would shut down at the end of this year.

HSBC Amanah has been operating only since last summer, but competition from a well-funded international lender with substantial links to emerging markets would have been a considerable headache for QIB.

The impending closure is the result of a Qatari central bank circular requiring banks to separate their Islamic and conventional lending operations.

The Islamic banking operations of other conventional banks are also barred from Qatar's market under the central bank's directive. "It's difficult to fault QIB's position," said Raj Madha, a financial analyst at Rasmala Investment Bank, although he added that Masraf Al Rayan remained a formidable competitor.

The bank would benefit from the central bank's directive "to conventional banks to close their Islamic banking activities by the end of the year", said a recent note from TAIB Securities.

But analysts at the brokerage said new central bank caps on personal loans and interest rates could harm the bank's bottom line.

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