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Thu 23 Dec 2010 01:40 PM

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Gulf banks must merge to survive – IBQ boss

Government dabbling in banking sector crimps merger activity, says Qatar bank chief

Gulf banks must merge to survive – IBQ boss
Qatari investor stock exchange

Gulf banks are too small to compete with their global rivals and must merge if they are to survive, the managing director of the International Bank of Qatar (IBQ) has said.

In comparison to global lenders, Arab banks lag behind in terms of assets and size, said managing director George Nasra.

“If you look at the total assets of the 10 largest banks in the Arab world or the Gulf area, they are around $530bn, while on the other hand, the total assets of one Spanish bank, Santander, is around $1.6 trillion. In global terms, banks in the Gulf are small and they need to consolidate,” he told Arabian Business.

Doha-based IBQ is in the final stages of negotiations for a merger with Al Khaliji Bank, the Gulf state’s sixth largest bank by market value. The merger is slated for completion in the first half of 2011.

Such deals will be key to thinning out the Gulf’s saturated banking sector, Nasra said.

 “To take the case of Qatar, you have seven commercial banks, four Islamic banks and seven branches of foreign banks, for a total population of 1.6 million. The country is definitely overbanked and the sector is ripe for consolidation,” he said.

Regulatory hurdles are a crucial factor in the lack of consolidation seen in the Gulf’s banking sector. An added complication is the state links of banks including National Bank of Abu Dhabi and Qatar National bank, which are majority owned by their respective government.

“[This] makes a merger more or less political,” said Nasra. “To be honest with you, I don’t see any reason what so ever for the continuation of government ownership for these banks. Most, if not all, of these banks are very profitable, financially very sound and very well managed… [and] can work on a more commercial basis.”

The activity would also give a much-needed boost to the region’s bourses, if commercialised banks went on to primary or secondary listings.

“If they were to be listed… they will increase liquidity in the market. And they would provide investment opportunities for GCC citizens,” he said.

The merged unit of Al Khaliji and IBQ will be Qatar’s third largest bank by capitalisation. The bank expects to list on the Qatar exchange, Nasra said.

 

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Peter Cooper 9 years ago

Not too sure about this as most of the money in the Gulf banks comes from oil and you can understand the governments wanting to keep control of this and not leave entirely to commercial banks of no national affiliation. And not sure Bank Santander is a good example to follow as Spain has the highest debt to GDP ratio in the world and euro bonds seem to be the next banking crisis in the making.

Saudi Engineer 9 years ago

I honestly enjoyed your comment, and I respect your view very, very much. But... bankers and economists and most financial-related people do not share the same views as us lay men. Let us not forget that they are the ones in fact that drove us into the financial crisis of 2008. With their bonds, and "selling debt", and sub-prime mortgages...the list goes on and on. They have come up with an alternate reality where you can buy and sell anything. They do not think like you and I, and the further up the ladder they go in the financial world, the further out of touch they become.
I'm looking forward to being able to buy a "happiness bond" in the near future. Someone will be able to sell their happiness to me, in return for the original value of the happiness, plus a small annual interest rate.

Go economists!!

Telcoguy 9 years ago

@Peter, Spain does not have the highest debt to GDP ratio in the world. You should check three English speaking countries, uk, US and Ireland. Spain may or may not have issues with it's debt, but for sure is not the highest. It actually ranks 43 on the list I attach.

Then banco Santander is a great example, it has diversified to the point where the situation in Spain while a concern is not a show stopper. Spanish banks are in good shape, as good or better as British or Germans (who were busy buying too much of our debt) problem lies with the Cajas (savings and loans).
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html

Steve 9 years ago

Ireland debt to GDP of 997%
Netherlands debt to GDP 570%
UK debt to GDP of 423%
Switzerland dept to GDP 422%
Austria debt to GDP 250%
France debt to GDP 238%
Portugal debt to GDP 217%
Norway debt to GDP 201%
Sweden debt to GDP 201%
Germany debt to GDP 185%
Spain debt to GDP 176%
Greece debt to GDP 162%
Italy debt to GDP 132%
Australia debt to GDP 112%
USA debt to GDP 94%
Canada debt to GDP 65%
Japan debt to GDP 52%
Turkey debt to GDP 32%
Iceland debt to GDP 25%
South Korea debt to GDP 25%
Argentia debt to GDP 19%
Russia debt to GDP 17%
Indonesia debt to GDP 16%
South Africa debt to GDP 15%
Saudi Arabia debt to GDP 12%
Mexico debt to GDP 12%
Brazil debt to GDP 11%
India debt to GDP 6%
China debt to GDP 4%

Watch the US national dept in real time on this site
http://www.usdebtclock.org/
It rakes up another million so fast its scary.

Telcoguy 9 years ago

Can you give a source for your datum?Numbers seem off by a wide margin. Japan is around 190% for sure, roughly the only number I trust nowadays :)