As the largest Islamic bank in Qatar and one of the most significant Islamic banks in the region, QIB has made substantial progress since its launch nearly 30 years ago. It has developed a major presence in Qatar and also a web of subsidiaries and affiliates that span all the major global centres for Islamic finance.
Recent changes to Islamic banking regulations in Qatar, forcing conventional banks to shut down or sell off their Islamic banking arms, should also be a boost to QIB. The lender has the most well established local network so should be able to capture customers previously served by conventional banks.
Questions remain, however, about the capacity of local Islamic banks to absorb this extra demand. Conventional banks have until the end of the year to either sell their branches or transfer them to Islamic lenders. QIB should benefit from significant inflows of new deposits as this change is implemented.
The move will be good for the bank, which has a loan-to-deposit ratio of more than 100 per cent, making it look fairly stretched in comparison to its peers. Customer deposits actually fell over the past year, hitting QR26bn at the end of June 2011, compared with QR30.3bn at the end of 2010. Total assets have also declined slightly since the start of the year, to QR50bn from QR51.8bn at the beginning of the year.
But the impact of the switch in deposits could be more limited than expected. Early signs are that many customers, even retail ones, are simply converting to conventional banking, being less ideologically minded than initially expected.
Nonetheless, the end of competition from the conventional banks should help QIB arrest a decline in market share in the public sector. However, a cap on retail lending charges, which the central bank imposed in April, will probably hit profits.