Qatari bank merger to rebalance sector, increase competition: Moody’s

A proposed merger between three Qatari lenders – Masraf Al Rayan, Barwa Bank, and International Bank of Qatar – would benefit the Gulf state’s banking industry and create a more balanced competitive environment, Moody’s Investors Service said in a note on Tuesday.

“The merged entity between Masraf Al Rayan, Barwa Bank and International Bank of Qatar would help to rebalance the Qatari banking sector," said Nitish Bhojnagarwala, assistant vice president at Moody's.

“Currently in Qatar, 18 banks serve a population of only 2.6 million, and Qatar National Bank – the largest bank in the Gulf Cooperation Council – dominates with a market share of more than 40 percent of domestic assets,” he added.

Last December, the three banks said in a joint statement that they had begun initial negotiations for a potential merger. If the deal goes through, the new bank would have assets worth more than $44 billion.

The combined entity would be the largest Islamic bank in Qatar and the fourth-largest Islamic bank in the GCC.

However, Moody’s said it expects “considerable integration challenges with this merger,” which will be assessed in the event that the deal is agreed.

Islamic banking asset growth has outpaced that of conventional banking in Qatar, as indicated by a 21 percent compound annual growth rate (CAGR) of loans for Islamic lenders between 2011 and 2016, compared with 14 percent for conventional banks, the report said.

Moreover, while credit growth in the Gulf has slowed down as a result of lower oil prices, Islamic banks are expected to post double-digit growth.