DUBAI: The credit standing company Fitch has described the Qatari market as “overbanded” and believes that the nation’s lenders might use additional consolidation.
On June 30, 2020, Islamic financial institution Masraf Al Rayan (MAR) and Al Khalij Business Financial institution (AKCB) confirmed that they had been in merger talks, and on January 7 of this 12 months they confirmed that an settlement had been reached.
The deal will create one of many largest Shariah-compliant banks within the Center East, with mixed belongings of $ 47 billion as of September 30, 2020.
The merged entity will proceed beneath the MAR model and Fitch believes that the bigger lender might be in a greater place to supply financing for presidency initiatives.
“This might additional improve MAR’s publicity to authorities and government-related entities, which accounted for 47 % of its financing ebook on the finish of 3Q20, however would assist the financial institution’s asset high quality,” Fitch wrote.
The MAR settlement is the second merger in Qatar between an Islamic financial institution and a traditional one, after that of the Islamic financial institution Dukhan and the Worldwide Financial institution of Qatar (IBQ) in April 2019.
Following the deal, Fitch stated Dukhan’s cost-to-income ratio declined to 32 % within the first half of final 12 months, from 38 % in 2018, after the financial institution achieved 90 % of its value financial savings. deliberate via the merger.
In a press release on January 7 this 12 months, MAR stated its merger will obtain value efficiencies within the area of 15 % for the mixed entity.
“Extra Qatari financial institution mergers might generate value synergies that ease the strain on profitability from compressed funding margins and better mortgage impairment fees as a result of pandemic,” Fitch stated in its evaluation.
He predicts that extra lenders could comply with go well with, and Qatar’s banking sector “might see additional consolidation introduced on by strain on banks’ profitability from the coronavirus pandemic, notably these with weaker franchises and pricing energy. restricted”.
Commenting on the merger of MAR and AKCB, AKCB Chairman Sheikh Hamad bin Faisal bin Thani Al-Thani stated: “The mix of each banks will create better scale, capability and effectivity to allow us to assist our numerous base of shoppers and promote the advance of our product providing in all areas. We belief that this transaction will contribute to the event of the financial system as an entire ”.