Qatar National Bank SAQ

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Qatar National Bank SAQ

FIRST QATARI BANK IN 1964

NEW PRODUCTS AND MARKETS IN THE NEW CENTURY

FIRST QATARI BANK IN 1964

For much of the first half of the 20th century, Qatar remained an economic backwater under the British Empire. The tiny emirate’s main industry, and primary source of capital, had been pearl fishing. Yet, the dual blows of the global depression in the early 1930s and the invention of the cultured pearl by Japan toward the end of the decade, had left Qatar’s economy largely in ruins. New hope came, however, with the discovery of large oil deposits in the Persian Gulf. By the end of the 1940s, Qatar was already on its way to becoming one of the world’s richest per-capita countries.

The first bank to enter this new Qatari market was Britain’s Eastern Bank, which merged with Chartered Bank, setting up offices in Qatar in 1948. That bank was soon followed by rival British Bank of the Middle East, and then by the Ottoman Bank. Toward the end of the 1950s and into the 1960s, several new banks appeared in Doha, including Jordan’s Arab Bank, and Lebanon’s Intra Bank.

By then, the ruling Al-Thani family had already begun its drive toward full independence from the United Kingdom. Despite its tiny size—Qatar’s total population, including expatriates and other foreigners, numbered just 80,000 at the beginning of the 1970s—Qatar’s existing and potential wealth was enormous. The ruling family recognized the need to retain a greater share of the fast-flowing oil profits within its borders. In 1964, therefore, the Qatari government established the country’s first Qatari-owned bank. Called the Qatar National Bank (QNB), the new bank was in fact established as a commercial bank. The Qatari government held 50 percent of the new bank’s stock, with Sheikh Khalifi Al-Thani serving as chairman. The remaining 50 percent was held by Qatari investors. Although not a fully fledged national bank, QNB nonetheless served as the depositary for government funds, and was given the mission to “encourage economic development and to support the national economy.” Two years later, the Qatari government set up the Qatar and Dubai Currency Board, to govern the rial shared between the two emirates. That body provided the country’s currency functions in the absence of a true central bank.

QNB remained a small player in its own market through the end of the decade. Founded with assets equivalent to £1.2 billion, QNB built up assets of more than £9.5 billion by 1970. Yet QNB’s growth continued to be overshadowed by its foreign-owned competitors, which boasted total assets of nearly QAR 415 billion (£36 billion) at the end of the decade. While QNB had been steadily profitable, with profits rising to £467 million at the end of the decade, its true growth came only in the wake of Qatar’s independence in 1970. The bank also had to contend with the entry of a number of new foreign rivals, including Tehran-based Bank Saderat Iran, the United Bank of Karachi, the Bank of Oman, and New York’s First National City Bank.

Qatar’s declaration of independence, and the subsequent economic and political reforms carried out by the government into 1972, set the stage for QNB to emerge as Qatar’s single most dominant bank. The new government quickly moved to take control of the country’s banking sector, issuing Decree Law No. 4 in 1970. The legislation severely limited the operations of foreign banks in Qatar, restricting new foreign banks seeking to enter the country to just a single branch and putting a cap on further expansion, including mergers, by existing foreign banks. The foreign banks were also required to maintain minimum interest-free deposits with QNB, and to invest 50 percent of each branch’s total deposit directly into the Qatari economy.

The new legislation stimulated the appearance of a local banking industry, with the first new domestic bank, Commercial Bank of Qatar, appearing in 1975. By the early 1980, a third bank, Doha Bank, had also been created. Nonetheless, QNB remained far and away the dominant fixture in the Qatari banking sector, representing 60 percent of all deposits in the country. QNB had also become the country’s largest lender, holding 36 percent of the credit market. QNB’s stature, and the rising importance of Qatar in the regional and international economy, had led QNB to become the first Qatari bank to establish offices outside of Qatar, with the opening of its first branch in London in 1976. By 1981, the company had entered France as well, opening an office in Paris.

COMPANY PERSPECTIVES

QNB’s cornerstone values: Prosperity, Community, Growth, and Focus are the essence of our motto, “Together Forward.” This embodies the spirit of QNB and we intend to make a positive difference by giving back to the community and embedding the country’s wealth within every facet of the society. “Together Forward” emphasizes on our commitment to go beyond just extending a helping hand.

NEW PRODUCTS AND MARKETS IN THE NEW CENTURY

As Qatar’s main bank, QNB played the role of pioneer, introducing a wide range of modern banking services. These included the introduction of credit cards and ATMs for the retail sector. The bank also began expanding its network throughout the country, in order to serve its fast-growing population; from just 70,000 in the early 1970s, Qatar’s total population swelled to more than 700,000 by the year 2000. By the middle of the first decade of the 2000s, QNB had built up a network of 39 branches and offices. The bank catered to its increasingly international clientele by adding a number of locations in the country’s leading hotels, the Grand Hamad, Ritz Carlton Doha, Sheraton Doha, and Doha Marriott.

QNB’s dominance of the Qatari banking sector meant that, however vibrant Qatar’s economy might be, the bank’s future growth prospects there remained limited. As a result, in the early 2000s, QNB began developing a new strategy based on the creation of new banking products and services on the one hand, and expanding into new markets on the other. In 2002, the bank began its first move into the regional market, expanding its business activities into Saudi Arabia and Iran. In that latter market, for example, QNB became a major investor in the Iran Eurobond launched in July of that year. At home, QNB launched a new electronic banking system, providing for Internet-based credit cards. The new system later enabled the bank to launch Qatar’s first real-time online banking system, introduced in 2006.

QNB also laid plans to expand its physical presence in the Middle East and North African regions. In 2004, the bank joined with the Bank of Beirut and Emirates Bank International in order to apply for a banking license in Syria. The bank also eyed the Yemen and Libyan markets, especially as the latter emerged from the long-held economic sanctions levied against it by the international community. The bank applied for and received licenses to operate in both countries.

QNB also sought to expand its range of services, and in 2005 the bank launched its own Islamic banking affiliate, QNB Al Islami. The sharia -compliant bank then opened its first branch in Doha that year. While a number of other Islamic banks already operated in Qatar, the creation of QNB Al Islami was the first by one of the country’s commercial banks, underscoring the rising importance of that banking market.

At the same time, QNB made a major move into the booming private wealth and asset management sector, buying London-based Ansbacher Group Holdings Ltd. in 2004. Founded in 1894 as Henry Ansbacher & Co., that firm had become a leading trader in U.S. securities in London by the 1930s, and a leading U.K. stockbroker. Ansbacher later expanded into the offshore banking market, establishing offices in Switzerland, and acquiring operations in the Cayman Islands and the Bahamas. The acquisition of Ansbacher, at a cost of $250 million, provided a major entry for QNB into the wealth management field. In particular, the Ansbacher acquisition was seen as a key element in QNB’s regional expansion strategy, allowing the bank to target the high-end sector in its new markets. Following its acquisition, Ansbacher established new branches in Dubai’s International Finance Center. In 2006, Ansbacher was also the first financial body authorized to open an office in the new Qatar Finance Center in Doha.

With the Ansbacher acquisition under its belt, QNB began rolling out its regional expansion strategy. By the end of 2006, QNB had opened a representative office in Libya, and added branches in Singapore and Kuwait as well. The company also announced plans to open a full branch in Yemen, which was expected to be operational by June 2007. By then, the bank had already expanded in the Dubai market, and, in March 2007, announced that it had been granted a license to operate in Oman as well. Through its continued international expansion effort, QNB hoped to become one of the top five banks in the region by the end of the decade.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Ansbacher Group Holdings Limited (U.K.); QNB International Holdings Limited (Luxembourg).

KEY DATES

1964:: Qatar National Bank is established as first Qatari-owned commercial bank in Qatar.
1976:: First international branch is opened in London.
2004:: Company acquires Ansbacher Group Holding Limited in London, adding private asset and wealth management services.
2006:: Qatar National launches regional expansion strategy, acquiring licenses to open offices and branches in Yemen, Libya, Singapore, Dubai, and Kuwait.
2007:: Company receives license to operate in Oman.

PRINCIPAL COMPETITORS

HSBC Bank Middle East Limited; Bank Saderat Iran B Qatar; Commercial Bank of Qatar; Arab Bank PLC; Doha Bank; BNP Paribas Doha; Qatar International Islamic Bank; Ahli Bank QSC; United Bank Ltd.; Standard Chartered Bank B Qatar; MashreqBank Psc B Qatar; Qatar Industrial Development Bank.