A proposed merger between three Qatari banks—Masraf Al-Rayan, Barwa Bank and International Bank of Qatar—if successfully completed, would create the largest Islamic bank and second-largest bank in Qatar, and would result in a more balanced competitive environment in Qatar’s fragmented banking system, said a report issued by Moody’s Investors Service.
The merger is currently at due diligence stage and will be subject to approval by the relevant authorities and the three banks’ shareholders. The report notes that there would likely be considerable integration challenges with this merger, Reuters reported.
“Currently in Qatar, 18 banks serve a population of only 2.6 million, and Qatar National Bank—the largest bank in the six (Persian) Gulf Cooperation Council Arab states (Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman)—dominates with a market share of more than 40% of domestic assets,” said Nitish Bhojnagarwala, assistant vice president at Moody’s.
“The merged entity between the three banks would help to rebalance the Qatari banking sector,” he said.
The report said that upon the successful completion of the merger, it would create an entity with total assets amounting to around QAR173 billion ($48 billion) and a market share of around 14%. “The combined entity would be the largest Islamic bank in Qatar (ahead of Qatar Islamic Bank) and the fourth-largest Islamic bank in the (P)GCC,” adds Bhojnagarwala.
Moody’s expects the enhanced franchise of the merged entity to benefit from the growth of Islamic assets in the (P)GCC. “Islamic banking asset growth has outpaced conventional banking in Qatar, as demonstrated by a 21% compound annual growth rate of loans for Islamic banks between 2011 and 2016 compared with 14% for the conventional banks,” explains Bhojnagarwala.
