Proposed Masraf Al Rayan-Al Khaliji merger seen supporting Qatar economy
Industry experts and banking captains view the proposed merger between Masraf Al Rayan and Al Khaliji as a sustainable journey to create fewer but stronger financial institutions with deep pockets to support the overall economy.
Terming the proposed move as “expected”; Dr R Seetharaman, group chief executive of Doha Bank, one of the largest conventional lenders in the country, said “if you have sustainable journey in mind, then the industry consolidation is bound to happen.”
He made this observation at a webinar “Qatar’s Banking Sector: Looking beyond Covid-19”, organised by the Qatar Stock Exchange (QSE) and moderated by Mohsin Mujtaba, director (Product Development) at the QSE.
Highlighting that there are 10 local banks and seven foreign lenders, which is “too much” for a market like Qatar; he said the consolidation has to be seen in the context of shrinking revenues and the increasing digital governance that is making the banks go global.
“Essentially, revenues are going to shrink (as they have to be shared with technology companies) and therefore cost has to be rationalised,” he said, adding the consolidation in the financial service helps the customers get value advantage.
The potential merger between Masraf Al Rayan and Al Khaliji would lead to the creation of one of the largest Shariah-compliant bank in Qatar, and in the Middle East, with total assets exceeding QR164bn and a shareholders’ equity of more than QR19bn.
The merger is also expected to contribute positively to the economic development in Qatar by supporting corporate businesses and small and medium sized entities, and would also create a strategic partner for the public sector.
“We are overbanked compared to the size of the market we are operating in. It is natural to see some consolidation in the market and it will help the whole sector,” Qatar Islamic Bank group chief executive Bassel Gamal said, adding competition is good for the market.
Omar Mahmood, partner at KPMG Qatar, a leading global consultancy firm, said the region has witnessed a flurry of mergers and acquisitions in the sector.
“Given the number of the banks, demographics and the size of the market, there is clearly need for further consolidation,” Mahmood said, adding there is a need for fewer but stronger and larger financial institutions with deep pockets.
Barwa Bank and International Bank of Qatar had last year completed the legal merger.
Qatar’s banking landscape is undergoing broader changes with a rising shift towards digital banking, a move that is slated to see a reduction in branches and physical presence in the days to come.