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WorldJuly 1 2014

Ali Ahmed Al-Kuwari: no pause for breath for QNB

Not satisfied with being the number one bank in the Middle East, Qatar National Bank is looking further afield as it seeks higher growth opportunities outside Qatar. Its acting group chief executive speaks to James King.
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Ali Ahmed Al-Kuwari: no pause for breath for QNB

In recent years, Qatar National Bank (QNB) has presided over an enviable growth trajectory. Through a combination of discipline and ambition, Qatar’s largest lender has developed into the top financial institution for the Middle East and north Africa region, with a market capitalisation of $36.1bn and total assets of $126bn, as of March 31, 2014. “Our strong performance has extended over a considerable period. In the five years until the first quarter of 2014, QNB has achieved impressive compound annual growth rates for assets at 27%, loans 31%, operating income 23% and profits 19%,” says acting group chief executive Ali Ahmed Al-Kuwari.  

This extraordinary rise has come at a time when a number of major Western lenders have been scaling down their presence in the region. Few banks better epitomise the shift in economic power from West to East than QNB. Well capitalised and flush with liquidity, the bank has embarked on an aggressive strategy of international expansion as it seeks higher growth opportunities outside Qatar. This has seen QNB's reach extend to 26 countries across three continents. "Our international expansion is one of the key pillars of QNB Group’s strategy to become a Middle East and Africa icon by 2017," says Mr Al-Kuwari.

International growth

Executing this strategy has delivered immediate benefits to the bank's balance sheet. Following some notable acquisitions, including a 97.12% controlling stake in National Société Générale Bank Egypt in 2013, QNB saw its international contributions to overall business performance increase substantially.

"These additions and growth in our established foreign network have boosted international contributions to 28% of profit in the first quarter of 2014, up from 21% in the same period in 2013. Given the limited opportunities to increase QNB’s already dominant domestic market share, international expansion is the logical approach for growth," says Mr Al-Kuwari.

Even so, this growing footprint has presented the bank with a new set of challenges. Ongoing political and economic upheaval in markets across the Middle East and north Africa has introduced a heightened element of political risk to QNB and other Gulf-based lenders expanding in the region.

However, these longer term issues appear to have had little impact on the bank’s irrepressible growth for now, even in challenging new markets. Between March 2013 and March 2014, QNB Alahli, its rebranded Egyptian subsidiary, registered net income growth of 15%. This trend has been sustained along most metrics this year, with total deposits increasing 5% between December 2013 and March 2014, and total assets increasing 7% over the same period.

Keen to build on this success, QNB is actively looking for new growth opportunities abroad. “In line with our stated vision, we will continue to invest strategically while ensuring adequate due diligence in markets that potentially expand our geographic footprint, primarily in the Middle East and north Africa and sub-Saharan Africa regions,” says Mr Al-Kuwari.

Diversification role

Meanwhile, on the domestic front, QNB has benefited from Qatar’s massive infrastructure spending plans. As the country’s largest lender, with about 45% of the banking system’s assets, it is well placed to handle the larger project infrastructure deals while promoting the substantial growth of the non-oil sector.

“As the biggest bank in Qatar, it is essential that we continue to play a pivotal role in the diversification of Qatar’s economy. The next phase of growth will largely stem from the non-oil sector and QNB is supporting this diversification and broadening its loan book in the process. For example, the share of lending to the services sector rose to 16.1% of lending in June 2013 compared with 10.3% a year before,” says Mr Al-Kuwari.

As a feature of this growth, the bank’s leadership is also keen to diversify its customer segments in the competitive domestic market. “Mid-size corporate and small and medium-sized enterprises are becoming increasingly important and we have placed increased emphasis on these segments, which we expect to record strong growth in the years ahead,” says Mr Al-Kuwari.

QNB’s outlook is promising. The bank’s capital adequacy ratio stands at 16.3%, while its loan-to-deposit ratio is 92%. This outlook is reflected in the strength of the Qatari banking sector as a whole, which Mr Al-Kuwari sees expanding rapidly in the medium term.

“The outlook for the overall banking sector in Qatar is positive given the many opportunities created by the rapidly growing economy and the strong financial metrics underpinning most banks. They have the strong backing of the government, which provides a further anchor for their stability. From this strong base they are well placed to serve the growing domestic market as well as expanding regionally and internationally,” he says.

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Read more about:  Middle East , Qatar