Monday, Feb 07, 2011
(This item was originally published Sunday.)
DUBAI (Zawya Dow Jones)--Qatar's central bank has ordered conventional lenders operating in the gas-rich Gulf Arab state to shut down Islamic finance activities by the end of 2011, two bankers familiar with the situation said Sunday, in a move that could curb an important source of income for many banks.
The central bank earlier this month sent a memorandum to non-Islamic lenders operating in Qatar asking them to close their Islamic units without providing a reason for the decision, according to two senior banking officials, who reviewed the document.
The move is seen to benefit the pure Islamic players such as Masraf Al Rayan and Qatar Islamic Bank, or QIB, whose shares rose 10% and 8.4% respectively.
"We expect banks to convert or restructure Islamic corporate loans into conventional loans, wind down or sell their Islamic loans," said Jaap Meijer, Dubai-based head of the banking team at AlembicHC research.
Islamic finance has been on the rise in the region and many international banks have opened branches across the Gulf including Qatar in a bid to tap growing demand. Some of the state's largest banks such as Qatar National Bank and Doha Bank are also affected by the central bank directive.
A Qatar central bank official, who declined to be named, confirmed that the memorandum was issued but declined to provide further details.
Meijer said the biggest impact would be on Qatar National Bank, as 12% of its assets, 16% of its loans and 9% of its profits are derived from Islamic finance. QNB's shares lost nearly 5%. Doha Bank and Commercial Bank of Qatar would also be affected by the central bank move, he added.
"QIB could be key beneficiary as it currently has 50% market share in Islamic finance. If it captures just 50% of loans of the big three, this could boost loans by around 35%," Meijer said.
While analysts and bankers are assessing the impact of the central bank's decision, few can offer an explanation of the motive other than that the country's authorities want to separate the product offering of conventional banks and shariah-compliant lenders.
"We don't know the real reason, the picture is still unclear," one of the Qatar-based bankers said.
-By Nicolas Parasie, Dow Jones Newswires; +9714 446-1681; nicolas.parasie@dowjones.com
(Leila Hatoum in Dubai contributed to this report.)
Copyright (c) 2011 Dow Jones & Co.
(END) Dow Jones Newswires
07-02-11 0413GMT
