Lend Me Your Ear

Being the largest lender to the Qatari government, what is your strategy to support the country’s path toward the 2022 FIFA World Cup?

Qatar is witnessing a strong investment drive to diversify its economy, and hosting the FIFA World Cup in 2022 provides a key milestone toward that end. To support the country’s efforts, QNB has focused its financing on four key areas: utilities, transport, real estate, and the FIFA World Cup infrastructure. In utilities, we have continued our active involvement in financing key projects such as water and sewage networks. In transport, we were involved in vessel and aircraft financing for prime shipping and transport companies. These deals will further propel Qatar as a transport hub for the trade corridor between Southeast Asia, the Middle East, Europe, and Africa. In real estate, our involvement in the iconic Lusail City development has been a particular success as a benchmark project in both infrastructure and real estate development financing. We have seen continued demand for residential projects and hospitality, helping Qatar reach the 60,000 hotel rooms targeted for 2022. Gearing up for the 2022 FIFA World Cup, we have participated in many projects, including roads, stadiums, and infrastructure.

What are your objectives for the Southeast Asian market?

Building on our continued success, our vision is to become a leading bank in the Middle East and Africa and Southeast Asia (MEASEA). MEASEA markets will continue to be the focal point of global growth for the coming years. These regions require further trade and investment flows to support the building of the foundations for socio-economic developments, such as infrastructure, including transport, real estate, power, telecoms, healthcare, education, and tourism. This will, in turn, drive population growth, consumer demand, and consumption, resulting in higher economic growth across the region. By strategically positioning our business toward and across these markets, we are securing our vision of becoming a leading bank in MEASEA by 2020. Through our own network, as well as through our partners and alliances, we have the necessary local knowledge, expertise, and understanding of the risks and opportunities to successfully create and capture significant value in those markets. This positively contributes to QNB’s growth and adds additional strength to the group by diversifying our sources of revenue and profit. India is the world’s seventh largest economy with the second largest population and an investment grade rating. India became the fastest-growing “major economy” in 2014 and is set on a positive trajectory due to raft of structural and fiscal reforms. Real GDP growth annually is expected to be around 7.5% annually until 2020. We hence see several opportunities in India. We are glad to announce that we obtained regulatory approval for a branch license in 2016. Right now, we are working on the establishment of our branch in India.

How do you assess the results of QNB’s acquisition of Turkey’s fifth-largest private lender, Finansbank, and how could this decision further increase trade between Turkey and Qatar?

This transaction is a significant milestone in QNB Group’s strategy of international expansion. With the addition of Turkey as a new market and one of the leading Turkish banks to its network, QNB Group further extends its international presence and will be able to increasingly benefit from the rapid development of trade and the strengthening of economic ties between Turkey and the Middle East in general, as well as between Qatar and Turkey in particular, taking into consideration the historic relations both countries enjoy. This also reflects QNB Group’s confidence in the long-term prospects of the financial sector and economy of Turkey.

As there is mismatch between the growth of lending and deposits in Qatar, do you have intentions to tap the debt and equity markets in 2017, particularly in Asia?

It is the slowdown in asset growth that means we have greater ability to be more opportunistic when it comes to issuing further debt. We have a large and stable liquidity buffer, with our wholesale funding made up from a diverse mix of deposits, structured deposits, CDs, and EMTN issuance. In the debt market, we will remain opportunistic, with no fixed-issuance targets. The maintenance of strong liquidity allows us to only access the market when it is beneficial to do so. Looking at new niche markets such as Pro-Bond, Kangaroo, Panda — EUR, and CHF, if they make economic sense. At the same time, we are agnostic to currency of issue as long and it swaps back to our USD target levels. As for the equity market, this really depends on the capital requirements or further plans for acquisition, as of now we are adequate on the capital requirements.

How do you assess the overall health of the banking sector in Qatar and what are the factors driving bank mergers?

The Qatari banking system is healthy. It has grown strongly in size in recent years, without compromising its profitability. We expect this trend to continue going forward. We foresee robust growth in the size of the banking system, partly driven by Qatar’s strong investment spending program. And we expect this growth to be healthy, with profits also projected to grow to new highs. Underpinning this healthy growth is the strong capital position, high-asset quality, and efficient cost structure of Qatari banks.

What are your business expectations for the next 12 months and your economic outlook for the year ahead?

Regarding credit growth, we expect a fiscal deficit around 2% of GDP in 2017, leading to continued demand for loans from the government. When it comes to liquidity, the higher oil prices should slow the withdrawal of government deposits, which declined by 11.1% year on year in December 2016. At the same time, I expect the private-sector deposits to grow on high population growth (6.3% in January 2017). This growth was 0.9% in December 2016 compared to 9.1% a year earlier.