The renowned businessman Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani, Chairman and Managing Director of Ahlibank Q.S.C who stands behind the remarkable success of the bank expects a very encouraging performance for the bank and he thinks the business could benefit from the government’s budget spending for the coming years.
In fact, he sees many investment opportunities in the local market.
Furthermore Ahlibank QSC Chief Executive Officer Salah Murad, is a veteran Gulf banker with over 33 years of commercial banking experience in the Gulf, including six years as the CEO of Ahlibank. Under Murad’s tenure the Bank has delivered sustainable growth and achieved impressive financial results.
Ever since Ahlibank was founded in 1983, it has stayed true to its traditional values. Ahlibank has a network of 16 branches and 58 ATMs throughout Qatar offering a full range of products and services. The bank is listed on the Qatar Stock Exchange and has grown to become one of the most respected banks in Qatar.
Moreover, Qatar has experienced an economic boom supported by the oil and gas industry. The country needs the support of the financial sector to fund the development of major infrastructure projects. Some analysts expect that Qatar will still see strong lending growth in the coming few years, so the future for Ahlibank is very encouraging.
Ahlibank has a strong growing retail and corporate business. In July 2015, the bank announced a net profit of QR 339.1 million for the first half of 2015, an increase of 12% over the corresponding period last year (H1 2014 – QR 302.7 million).
The Bank’s Balance Sheet has grown by 16.9% over June 2014 to a record QR 33,289 million, with business assets generated from core banking activities increasing by 15% to reach QR 22,308 million, reflecting Qatar’s strong economy.
In supporting its business growth, Ahlibank has succeeded in increasing its total funding by 17.1% to QR 26,006 million over June 2014. Due to an increase in medium term borrowing, the bank’s stable funding as a percentage of total liabilities increased to 7.2% in June 2015 from 0.8% in June 2014, resulting in an improved liability structure.
Total Core Operating Income grew by 12.5% to QR 520 million in H1 2015 over the corresponding period in 2014. Net Interest Income and Non-Interest Income increased by 7.7% and 29.2% respectively over H1 2014, reflecting its business banking solid franchise.
Ahlibank has continued to invest in infrastructure and human capital and the bank’s Cost to Income Ratio has improved to 27.8% in H1 2015 from 30.9% in H1 2014, highlighting operational efficiency.
The Bank’s Non-Performing Loans ratio (NPL) stood at 1.14% as of June 2015, compared to 1.30% in June 2014, indicating a sound asset quality and risk based culture with a strong NPL coverage ratio of 145%.
The key financial performance measure, Return on Average Equity (ROAE) stood at an impressive 16.4% for H1 2015, notwithstanding the Bank’s strong Capital Adequacy ratio of 16.1%. The Return on Average Assets (ROAA) was at 2.24%, reflecting the bank’s emphasis on earnings over size.
BL: Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani, what are your views on Qatar's banking sector?
Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani: I start by saying that there is never a dull day in Qatar. The country is full of exciting opportunities and new developments that really make the business community motivated about doing business in Qatar. The banking sector in Qatar is a very well regulated sector and I have full trust in the Qatar Central Bank in ensuring that all banks are well capitalized and well managed. All banks receive the support of the Central Bank and there is a close corporation in all aspects for the benefit of the country and its banking community.
BL: What distinguishes the economy of Qatar, especially that the economy reflects directly on the banking industry? Knowing that Qatar's economy is in a way dependent on the gas and oil, how is the country diversifying its investments all over the GCC and also all over the globe?
Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani: I can say with confidence that the economy of Qatar has a subtle diversified plan which may not be seen by outsiders, but we feel it internally, as diversification takes time - it’s not a one day transformation. We have seen many sectors of the economy growing and a good example is the tourism sector which has shown tremendous growth and there are also other industries that are behind the scene of Qatar's progress for instance; the industrial zone has recorded excellent achievements. Subsequently, there is planned diversification and the government is focused on this goal. Definitely, there is a diversified income stream for the government, and I think the other element is the sovereign wealth entity, which will give Qatar huge support for future generations too, so it all adds up.
BL: What about the international investments especially that such investments are part of Qatar's diversification plan?
Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani: During the late 1970s and early 1980s, State of Qatar amassed large surpluses of petrodollars which could not be fully invested in Qatar only. Petrodollar surpluses have been recycled by commercial banks in the United States and other industrialized nations, as well as by international institutions. By drawing against petrodollar surpluses as deposits or certificates of deposits, banks were able to expand their volume of lending. For bankers, the most obvious clients were the developing countries. Petrodollar surpluses have also been used to increase the official reserves of the oil-exporting countries at both the International Monetary Fund and the International Bank for Reconstruction and Development. Therefore, surpluses from petrodollars can only achieve so much growth within the internal market, but we really need to have diversification in any investment principle because it is not wise to put all our eggs in one basket. Hence, we really need to go abroad and acquire prime investments and those investments have proven to be very profitable and the State of Qatar has benefited from their value appreciation. I think the next step will be leveraging some of these investments to see how it will benefit Qatar in terms of industry or in enhancing the well-being of all Qatari citizens and future generations. Such investments contributed to education and health. Accordingly, all these investment will definitely one day come to this country with fruitful benefits.
BL: How did Qatar achieve this global fame and international influence?
Salah Murad: It is a blessing that we have such a forward-thinking country as Qatar in highlighting the need for change in the Arab world. I think that much of the credit should go to His Highness Sheikh Hamad Bin Khalifa Al-Thani, the Father Emir whose vision for Qatar was focused on long-term benefits, in turn the Emir HH Sheikh Tamim Bin Hamad Al-Thani is translating his father's vision into reality. It’s all about leadership and promoting Qatar across the globe, not just in terms of economic investments, but also what the leadership has done in terms of mediating and supporting people financially in Arab countries. I think that it is this leadership that has placed Qatar on the world stage
BL: Qatar is famous for investing in the sport sector, does this sector boost the banking industry?
Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani: Qatar is investing in the sports sector to promote and attract foreign direct investments (FDI) into Qatar, and the more foreign direct investments that come into Qatar benefits everybody not just the banks. Therefore, sport is just the means rather than the end result. It’s a very strategic and clever way of promoting Qatar and forms part of Qatar's national development strategy for 2011–2016.
For instance, FDI inflows represent only around 1% of GDP in MENA countries, compared to 3% in Asia, Latin America or Eastern Europe and Central Asia. FDI inflows in MENA remain heavily concentrated in real estate, mining, and the oil and gas industry sectors. Qatar is set to attract substantial FDI between now and the football World Cup in 2022, with plans to spend $205 billion between 2013 and 2018 on a range of projects, including transport, housing, electricity and water generation.
BL: Salah Murad, what do you think of Qatar's banking industry? What about the competition, and do you think that Qatar is overbanked?
Salah Murad: Qatari banks are ready to play a role in funding the country's massive infrastructure expansion. Historic performance of Qatari banks has been strong. The local economy and the environment are very supportive to those banks, but going forward, I think the country is already overbanked by some measures and there is a benefit in consolidation especially as Qatar grows to a certain size, where banks will find it more exciting to go and expand outside their home market. At that stage, Qatar will need bigger banks to compete, therefore, there will be a need for some consolidation in the future as the Qatar banking market matures. At the moment Qatar is still developing and the country needs the current number of banks to support its current development.
BL: Many Qatari banks are trying to spread their wings in pursuit for global growth, what about Ahlibank?
Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani: We have been implementing our current strategy to focus on growing our market share in Qatar and being at the heart of the local community. Once we are satisfied with the local market share, then we will consider expansion opportunities outside Qatar. I think we still have many exciting opportunities within Qatar. It is safer to operate in a market we know well and understand, than actually going abroad. For the time being, Ahlibank's board has taken the view to focus on the local market and serve the economy of Qatar.
BL: How would the recent drop in oil prices reflect on GCC banks?
Salah Murad: The size of the drop in oil prices is unexpected and it is tough to sell oil at 50% lower than before. A number of countries might adjust faster than others if oil prices remain at this lower level. This will definitely affect all GCC banks. Qatar has always managed its economy in a very conservative way and even with the low oil price, we haven’t felt any indications of any slowdown. In fact, all major projects are going forward as planned. The government has been mandating projects without any cancellations, because Qatar has a budget surplus and the country has additional income from the foreign investment to support and sustain its growth.
BL: What about the GCC single currency?
Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani: Creation of a common currency area has been one of the cherished goals of the GCC countries. We hope to have a standard GCC currency, it will be good for regional cross border business.
BL: What’s your vision and what are the challenges of Ahlibank? What’s the plan for 2015?
Salah Murad: There are two important points where we could focus more on: technology matters and improved governance.
With technology, we can deliver our services and products across new channels. Our services are varied not only in what we deliver, but how we can deliver them to customers. Our experts help to select and deliver the best blend of platforms. We are continuously striving to leverage research and insight to deliver better customer experiences using technology. Technology doesn’t come cheap, but it’s something you have to continually invest in.
Corporate governance and the way we conduct business is very important and we continue to focus on improving governance within the bank.
As for strategy and vision, we have decided to focus on Qatar. We like to be the people’s bank. My challenge is probably size, because the transactions in Qatar are very large and also there are many customers. Consequently, the bank needs to grow to match customers' continuous demands and higher expectations. We have made significant progress in improving our size, so that we could match our rivals.
Additionally, I wish to see a 100% Qatarization. My ultimate wish is to have a bank workforce that is 100% Qatari.
BL: Sheikh Faisal, let’s talk about the financials of Ahlibank, how do you compare your 2015 to the previous years?
Sheikh Faisal Bin AbdulAziz Bin Jassem Al-Thani: We have had a good run in the last two years, our profit for H1 2015 grew by 12% when compared to the corresponding period last year and Ahlibank has grown in all business units. We have built reserves for future rainy days. The idea is to have a sustained growth. Investing in people, technology and infrastructure adds extra cost. But these are necessary long term investments. We will keep it simple and we look forward to a partnership with our major shareholders, one of them is Qatar Foundation. We are excited on leveraging on this relationship.
BL: What is the present capital of Ahlibank?
Salah Murad: Our current total shareholder equity post dividends is QR 3.9 billion and we do not have any plans at the moment to increase capital, which we last raised in 2012. We are very much adequately capitalized and when compared with our peers, we are among the top banks.
