R Seetharaman is the chief executive officer of Doha Bank, which the Middle East's banking industry says, has redefined the growth pattern for banks in the region. The bank recently entered the UAE market by setting up branch operations in Dubai with Seetharaman being hailed as one of the best bankers the region currently has. Doha Bank has always been able to maintain a robust growth rate with the RoE touching 50 per cent in 2005.
"We have our own philosophy in banking. We do not aspire to grab big deals like HSBC or Citibank. Our focus would be to participate in small to medium-sized deals and ensure good returns to our shareholders," he said.
This is precisely what he has been doing - and with great success - ever since he took up the reins of Doha Bank about four years ago. Speaking to The Business Weekly's CL Jose in an exclusive interview, he spoke about the bank's future plans and his views on the region's banking industry. Excerpts.
How many branches does Doha Bank have?
In Qatar, we have 30 branches on the conventional side and other branches on the Islamic side. We have set up 10 electronic branches to cater to the needs of the people living in areas not represented by Doha Bank. Thus, we have a total branch network of 44 in Qatar alone.
Which are the Islamic branches?
These are hybrid branches set up as per the specifications of the Qatar Central Bank. These branches function like full-fledged Islamic entities with a separate sharia'a board.
Outside Qatar?
We have one branch on Wall Street, another in the UAE. We recently got a licence to operate a bank in Kuwait. We run representative offices around the world which include places such as Singapore, Turkey, China and Japan. Doha Bank is the only GCC bank with a presence in China and Japan. In India, we have opened the Doha Brokerage International Services (DBIS). This was earlier called Select Securities. When we bought it, the name was changed to DBIS, which currently runs 121 branches. We have got a licence to operate on the Dubai Mercantile Exchange (DME) in Dubai.
We heard that Doha Bank is entering insurance. Is this true?
We are in the process of setting up a 100 per cent subsidiary insurance outfit in Doha and this will be known as Doha Bank Assurance Ltd (DBAL).
Is this first insurance company in Doha?
This is the first being set up in the regulated regime. Qatar already has branch operations of foreign insurance companies. But they were set up before the new regulatory framework was in place. This will be officially announced during the first week of January as a 100 per cent local insurance company.
Though Doha Bank has a wide presence, which are the GCC states you are planning to enter?
Doha Bank has a clear focus on globalisation and we have already established a presence in several countries. We are into brokerage service in India, we are planning to enter the insurance sector by setting up a 100 per cent subsidiary of the bank and we are exploring possibilities of entering new countries, not only in the GCC but elsewhere as well.
Which are the new areas you have in mind?
We have big plans in Yemen. We are setting up an Islamic bank jointly with Yemen's CACBank by subscribing to a 49 per cent ownership in that bank. Additionally, we will be buying a 50 per cent stake in CACBank itself. But these are subject to regulatory approvals. CACBank being an existing government bank will give us enough mileage to do business in Yemen whose economy has been showing good growth rates in the recent past. The due diligence process has already started on this bank.
So you will be into three banks. Right?
Yes, once the deals are through, we will have three banks to deal with - Doha Bank, CACBank, and the joint venture Islamic bank to be set up with CACBank. The name of this bank could be Doha CACBank.
Any other plans?
We also have plans to set up a carbon mercantile exchange in the Energy City in Qatar. As you know, we are the only commercial bank in this part of the world to have been recognised as a 'green bank'. We have taken on ambitious initiatives to fight global warming and climate change. We are also setting up an investment board to drive the carbon exchange initiative. We have already announced plans to raise $1 billion through an Islamic sukuk in the near future and the plan was announced at the recent Islamic infrastructure conference.
Is it the right time to launch sukuks?
We may not do it right now. We may do it next year by which time things should be okay.
You are the first Qatari bank to have set up branch operations in Dubai. You are the first GCC bank from outside the UAE to have set up a branch in the recent past. What brought you here?
There is a growing cross-border business between the UAE and Qatar. We will be running diversified operations in the UAE - retail, corporate, treasury, investment banking, as well as private banking. Over the last three years, through our representative office, we have funded more than $12 million. Through the branch, we propose to align the Qatar, UAE and US operations to global markets. We want all our operations to converge in order to basically support these three markets. Primarily, ours is a trade finance operation.
What sort of a branch network do you propose to have here in Dubai?
As of now, we are licensed to operate only one branch, but we can have more electronic branches. As far as Dubai is concerned, the operations will be predominantly trade finance. We have plans to enter all areas, including bancassurance. As of now, we have an arrangement with Oman Insurance for bancassurance. We have plans to enter all areas of financial services. Currently, we have 30 people and are planning to take on board 30 more.
We heard that more banks are going to be allowed in the UAE. Do you think the UAE needs so many banks?
Don't look at the number of people and jump to conclusions on the GCC. These countries are growing at a rate that is higher than most of the other countries. The national income of this bloc is growing at an average rate of above 20 per cent. The per capita income is growing at a rate of about 15 per cent and the fiscal surplus when oil was only $60 per barrel in 2006 was more than $132 billion and the current account surplus is about $172 billion. Projects worth about $1.2 trillion have already been announced in the GCC.
Can you please shed some light on Doha Bank's profitability ratios?
Doha Bank has been consistently maintaining a return on equity (RoE) of above 30 per cent, which is well above the industry average. We had an RoE of 50 per cent in 2005, which we ourselves know is exceptional. In the first nine months this year, our bank has posted an RoE of 33 per cent which is higher than most of the banks for this period. We used to have a return on assets (RoA) of six per cent though it has come down to about 3.5 per cent, which is still higher than the industry average.
What is the secret behind Doha Bank's consistent good performance?
Doha Bank has its strengths and weaknesses. We strive to convert these weaknesses into strengths. As a local bank, we have been constantly working on innovative product lines with the help of technology. We are focused and we are aware of our limitations. We don't 'chew' projects that we cannot 'swallow'. We are more concerned about our RoE and we are committed to giving shareholders a reasonable return.
Will your bank be keen to have a listing in Dubai?
Not now. However, I think we have to do it eventually. We have not given it a serious thought yet.
What is the capital now?
Our total equity is about $1 billion and the total asset base is around $8 billion.
Expansion needs money. What is your plan on the capital base?
This is one thing that has to come from the shareholders of the bank.
In the UAE almost all leading banks have the EMTN programme as part of their asset-liability management programme. Do you have any such plans?
We were the first bank from Qatar to put an EMTN programme in place. We have already got an approval for a $1 billion programme and from that, we have raised $340 million. Apart from this, we have taken syndications to the tune of $50 million at 26 basis points above Libor.
This is the season of subprime. Do you have exposure to that?
We do not have anything on this. We cannot afford to play with these products.
Qatar and UAE suffer from the same problems as far as currency value and inflation are concerned. What is your view on revaluation?
My fiscal prudence goes for either revaluing or re-pegging the currency to a basket of currencies in place of a dollar peg.
© The Business Weekly 2007
