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Doing Business in Qatar ( QNB 2009 Report )

Business Structure

1. Banking
2. Doha Securities Market

1. Banking
The Qatari Banking sector has a combination of both local and foreign banks. There are currently 17 banks, ten of which are Qatari-owned, including six commercial, three Islamic banks and the specialised Qatar Development Bank. In addition, two Arab and five foreign banks are represented in Qatar. Al Khaliji Bank is the most recent entrant to the Qatari Banking Sector, having been incorporated in January 2007. Qatar National Bank (QNB), with an equity base split equally between the Government and private sector shareholders, is the largest Qatari bank and the first national bank to be established.

The banking sector is supervised by the Qatar Central Bank (QCB), which was incorporated in 1993 when it took over the responsibilities of the former Qatar Monetary Agency. QCB has introduced the major international standards applicable to banking supervision and regulations based on the Basle Accord, and has implemented an automated link with local banks (QCB-Link) to enhance its ability to monitor banks in a timely and accurate manner.

An effective monetary tool utilised by the QCB is the stipulation of minimum reserve requirements for commercial banks. In February 2000, QCB instructed banks to maintain cash reserves equal to 2.75% of total deposits (including foreign deposits), from the earlier 19% of total demand deposits that was in effect. Further to this, the QCB requires commercial banks to maintain a loans-to-deposit ratio of 90% of the total deposits base.

Up until 1995, interest rates on both time deposits and credit facilities were controlled by QCB regulations. In 1995, following the introduction of QCB discount rate, all restrictions on interest rates on credit facilities were lifted. In February 2001, the QCB removed its ceiling on interest rate for local currency deposits, thereby freeing the banking system from all interest rate policy restrictions.

Short-term interest rates in Qatar follow closely those prevailing in the US, with a slight positive differential. QCB ’s repo rate stood at 5.55% by the end of October 2008.

Qatari banks (excluding International Bank of Qatar) recorded a 34.3% increase in net profit during the first three quarters of 2008 to reach QR8,109.8 million (see Appendix 4.3), compared to QR6,037.7 million achieved during the same period in 2007. During the first three quarters of 2008, Total Assets increased by 44.7% to reach QR321.4 billion, Deposits rose by 41.8% to reach QR192.8 billion, Loans advanced by 45.5% to reach QR199.6 billion and shareholders’ equity grew by 46.5% to reach QR54.0 billion.

The 2007 results for the Qatari banking sector (Qatari + Foreign) showed another impressive year, with net profits increasing by 48.9% to reach QR8,848.6 million (see Appendix 4.3). Total Assets increased by 55.9% to QR290.7 billion, Customer Deposits rose by 42.7% to QR185.7 billion, Loans and Advances increased by 52.4% to QR163.4 billion, and Shareholders’ Equity grew by 52.1% to reach QR48.2 billion. Other key performance ratios indicated a return on average assets of 3.71%, return on average equity of 22.2% and loans and advances to customer deposits ratio of 88.0%.

In 2007 and 2008, one of main highlights of the domestic banking system was the rapid expansion of banks both regionally and internationally, through branches, representative offices, equity stakes, joint ventures and acquisitions. QNB ’s international expansion in 2007 and 2008 saw it establish a representative office in Libya, along with branches in Singapore, Oman, Kuwait and Yemen. QNB also acquired a 33.2% stake in Jordan’s Housing Bank for Trade and Finance, a 50% stake in Tunis based Tunisian-Qatari Bank, a 23.8% stake in UAE based Commercial Bank International, and a 49% stake in a new joint venture private bank in Syria.

2. Doha Securities Market

The Doha Securities Market (DSM) was officially opened on 26th May 1997. Thirty eight companies are currently listed on the exchange which include the banking and financial, insurance, service, and industrial sectors. In order to qualify for listing on the DSM, a company must have at least 100 shareholders, and a minimum share capital of QR 10 million, at least 50 % of which must be fully paid. Listed companies must publish audited financial results annually, and report results quarterly.

Seven brokers, have been licensed to trade on the market. During the first three quarters of 2007, two companies were listed on the DSM, namely ‘Al Khaliji Bank’, and ‘Mannai’. In 2006, four new companies were listed on the DSM, namely ‘Barwa Real Estate Company’, ‘Al Rayan Bank’, ‘First Finance’, and ‘Gulf Cement Company’. In 2005, ‘Nakilat’ and ‘Dlala’ were listed on the DSM.

The DSM reached a defining moment in its history on April 3rd 2005, when expatriates were for the first time allowed to trade in up to 25% of the share capital of all DSM listed stocks. The DSM is the first GCC market to allow expatriate residents to trade in shares of all listed companies. Previously expatriates were allowed to own and trade only in shares of Qatar Telecom (Q-TEL) and Salam International Investment. Another major development at the DSM was the setting up of the Qatar Financial Markets Authority in September 2005. The Qatar Financial Markets Authority will primarily be responsible for the supervision and control of the DSM.

Trading activities for the first three quarters of 2008 reveals a 133.1% increase in the value of shares traded, to reach QR139.5 billion, compared to QR59.8 billion during the first three quarters of 2007. During the first three quarters of 2008, the banking and financial sector represented 43.6% of the total value of shares traded, followed by the services sector with 39.4%, the industry sector with 14.5%, and the insurance sector with 2.5%. Trading activities in 2007 increased by 45.4% to reach QR108.9 billion, from QR74.9 billion in 2006. The DSM index was introduced in January 1998 at a level of 100. In March 2002, the DSM index was re-based with the addition of 1000 points, so as to better reflect more accurately the changes in the securities market. The cumulative change for the DSM index since 2004 is as follows:

The DSM Market capitalisation rose by 14.8% during the first three quarters of 2008, to reach QR399.0 billion (see Appendix 4.4), compared with QR347.7 billion as at year-end 2007.

The Net Profits of DSM listed companies showed an impressive growth of 57.8% during the first three quarters of 2008 to reach QR24.0 billion, compared to QR15.2 billion achieved during the first three quarters of 2007.

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