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Industry Analysis for Commercial Banks in Qatar
Following the blockade, the banking sector’s global rating was significantly lowered and placed on credit watch. The rating agency perceived Qatar’s credit worthiness to be on the verge of possible domestic political risks, uncertainties in government debts, and scarce external funding sources. Among the affected are Qatar’s giant national banks such as Qatar National Bank (QNB), the Commercial Bank, Doha Bank, and Qatar Islamic Bank, which were subjected to a Credit Watch negative. Until today, there are significant uncertainties relating to the response by the government in putting measures in place to curb this phenomenon (Adam Matthews Digital, 2017). Besides, investors are worried about potential implications to the banks.
Regarding stock market, the Qatari stocks realized a loss of about 10% shortly after blockade. In particular, numerous foreign investors sold their stock due to uncertainties. However, the Qatari moved faster to convince the investors to return their stock market, which saw some extent in the growth of the stock market.
Reportedly, Doha’s monetary statistics indicated that foreign assets had reduced owing to the reduced funding from an overseas bank and foreign investments, while commercial banks’ balance sheet also faced a significant surge of hundreds of millions QAR. According to the international monetary fund, the GDP of Doha was reduced from 3.4% in 2016/2017 to 2.8% in 2018 (Alsayed, 2017). The IMF also reduced its funding in the hydrocarbon and non-hydrocarbon sectors. Due to massive unsecured debt ratings, and deteriorating of the ability of Doha to service the financial sectors, the Qatari banks have been downgraded.
Qatar National Bank (QNB) is the top Qatari financial institution and among the riches banks globally. It owns approximately 45% of the overall assets in the Qatari banking sector. The QNB offers an array of services to customers such as private and commercial accounts and loans, insurance services, mutual funds, and investment management. However, QNB is facing competition from other leading financial institutions such as Arab Banking Corporation, Samba Financial Group, the Commercial Bank of Qatar, Doha Bank, and the National Bank of Abu Dhabi. These competitors have invested in varied and flexible financing options and service delivery to maintain their competitive advantage (Elshenawy, 2017).
Comparison of QNB, the commercial bank of Qatar, Doha Bank and Alkhaliji bank regarding assets, profits, exports and imports, suppliers, investors, and customers put into consideration of the policy of bonds and stocks, and the system of trade inside Qatar and abroad each bank (Coispeau, 2017).
The QNB is the biggest commercial bank in Qatar. By 2016, the assets amounted to $197,718,273,000, with a net profit of $3,407,769,000. It owns and runs other branches in 31 countries. The bank is a product of Qatar Investment Authority and the public with a favorable policy of bonds and stocks. The bank has a strong customer base, both locally and internationally, and it targets customers from all economic background. With greater market share, owing to the steady increase in bank’s branches globally, the QNB provide their customers with import and export guarantees to carry out trade finance business both in Qatar and overseas. Regarding investors, the ownership structure is divided equally with Qatar Investment Authority and the members of public with 50% of shares each.
The Commercial Bank of Qatar is the biggest private bank. By 2016, the firm’s assets were $35,818,760,000 with a net profit of $137,741,000. The bank has several branches in Qatar and offers varied services to its local customers and international customers. Besides, it targets all customers irrespective of the economic class (Alsayed, 2017). The bank offers its customers range of import and export guarantees to conduct business both locally and internationally. Regarding investment, the bank is a private institution. Its favorable policy of bonds and stocks, coupled with an effective system of trade, made the bank to realize a growth rate of 5.64% in 2015-2016. The Commercial Bank offers either Qatari bonds or international bonds from $30,000.
On the other hand, the Doha Bank recorded assets of $24,825,535,000 by 2016, with a net profit of $289,500,000. The investment of the bank is managed under four divisions including wholesale, retail, international banking, and treasury and investments. It has both local and international customer base. The policy of bonds and stocks, and the system of trade is efficient because specific divisions are set for each function. It also offers import and export guarantees to its customers to perform business locally and internationally.
Regarding Al Khaliji Commercial Bank, the bank has an asset of $16,647,596,000 with a net profit of $117,193,000 (Ustaoglu & İncekara, 2017). The bank is managed by different investors under four divisions; wholesale banking, retail banking, treasury management, and central functions management. They target local and international customers. Due to continuous expansion of business to the international arena, the bank have always offered import and export assurances to its customers to conduct business. Ideally, this system makes it easy to interact with customers both abroad and local, investors, and suppliers. Moreover, the policy of bonds and stocks, and the system of trade is efficient because specific divisions are set for each function.
Ideally, since the QNB, the Commercial Bank of Qatar, Doha Bank, and Alkhaliji Bank in Qatar mostly provide longer-term loans and play a role of financial mediators for such funds, the monetary system in each bank is mostly fractional reserve banking. The fractional reserve banking is a system where bank accepts deposits, issue loans or investments. However, the bank is expected to retain reserves equivalent to just a fraction of its deposit liabilities. Essentially, this system allows these banks to act as financial mediators between those who save and the borrowers. Besides, it helps in provision of long-term credits to borrowers while offering instant liquidity to depositors.
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