Supported by paid-up capital in excess of $1bn, Masraf al-Rayan’s financial strength is out of kilter with its relatively small size, boasting a domestic branch network of less than 10. However, the small on the ground presence is not a source of weakness. The bank’s robust capital base means it has the size and confidence to participate in some of the larger financings that will emerge from across the region.

Masraf al-Rayan balance sheet (QRbn)
  2008 2009
Total assets 16,769 24,124
Customer deposits 10,898 17,831
Loans and advances 13,326 17,750
Source: QNB Capital
Shareholders’ equity vs net profit
  2008 2009
Shareholders’ equity 5,694 5,962
Net profit 917 881
Source: QNB Capital

Within the space of barely four years, the bank has quickly established itself as a prominent Islamic bank, with Moody’s pointing out in a 2009 rating note that it enjoys a solid brand name and a strong reputation as one of the most dynamic sharia-compliant financial institutions in the country.

Masraf al-Rayan has shown a capacity to increase both assets and profits over the past year. Net profits rose by a healthy 51.8 per cent in the third quarter of 2010, to QR911.5m. Assets have increased at an even more rapid pace, growing by 51 per cent over the year to in excess of $8bn. Like many successful Islamic banks, it is managing to draw in deposits. Customer deposits grew by a robust 63.6 per cent to QR24.9m by end-September 2010.

These growth rates have been achieved in a difficult economic climate for the region, though mitigated somewhat by Qatar’s strong macro fundamentals supported by gas exports and high crude revenues. This will remain a source of strength going forward.

With solid support from its shareholders, some of which are Qatari state entities, it enjoys a solid risk profile. But like other Islamic financial institutions, it has limited liquidity management tools. The bank is still young, and its business model has yet to be fully tested. The next few years will see if its expansion ambitions will bear fruit.