Interview: Abdulla Mubarak Al Khalifa

To what extent is Qatar National Bank (QNB) targeting further expansion into international markets, and which sectors are of most interest?

ABDULLA MUBARAK AL KHALIFA: International expansion is one of the key pillars of QNB Group’s strategy required to achieve its vision of becoming a leading bank in the Middle East, Africa and Southeast Asia (MEASEA). In line with this vision, QNB Group will continue to invest strategically while ensuring adequate due diligence in markets to expand its geographic footprint, primarily in MEASEA.

The new markets have been identified using the following criteria: the macroeconomic outlook; banking sector penetration and growth potential, that is, competitive attractiveness); the ability to follow QNB’s existing customers; balancing QNB’s risk appetite; and regulatory requirements for market entry. Banks with strong operations in more than one country will definitely be favoured. In 2019 QNB obtained regulatory approval from the Hong Kong Monetary Authority to open a branch in Hong Kong, one of the world’s global financial centres. The branch will provide a full range of banking products and services, and is another vital step in QNB Group’s international expansion plans.

In light of the recent merger between Barwa Bank and the International Bank of Qatar, how can the sector benefit from further consolidation?

AL KHALIFA: The banking sector is undergoing a fundamental transition worldwide. With more and more financial services being offered outside the scope of the traditional banking sector, through the development of financial technology, shadow banks and big tech players, there is a strong pressure on the banking sector to consolidate. By doing so, banks can create economies of scale and drive down their cost-to-income ratios.

Consolidation also allows banks to invest more in their products and capabilities, allowing them to maintain relevance and competitiveness in line with changing customer requirements. As a result, consolidation tends to lower individual firm risk and increase the overall stability of the financial system as a whole.

How do you evaluate the Qatar Central Bank’s second strategic plan, especially in terms of its aims to develop financial literacy and human capital?

AL KHALIFA: The central themes of the second strategic plan are: regulatory cooperation; market development and financial innovation; maintaining integrity and confidence in the financial ecosystem; financial inclusion and literacy; and strengthening human capital.

QNB has undertaken various initiatives to educate customers about financial planning and management both in Qatar and across our network. For example, the QNB Prepaid Card enables greater financial inclusion by allowing previously unbanked populations to access credit facilities. In 2018 the monetary value in terms of net sales for prepaid cards was QR225m ($61.7m), a volume increase of 81% compared to 2017. Internationally, we collaborated with Prestasi Junior School in Indonesia to help achieve financial literacy in Jakarta. We have also participated in the Central Bank of Egypt’s recent financial inclusion initiative.

What does QNB’s positive credit rating mean for the economy and, more specifically, the banking sector?

AL KHALIFA: Fitch Ratings affirmed QNB’s credit rating at “A+” with a stable outlook, while several other agencies have maintained positive ratings for Qatar. The banking sector in Qatar remains healthy, reflecting high asset quality, strong capitalisation and high profitability. Non-performing loans were low at 1.9% of total loans in 2018 and returns to equity were high at 15.3%. Banks comply fully with Basel III capital adequacy standards, with a capital adequacy ratio of 18.0% at end-2018. The strong ratings reflect the capital strength, governance, prudent risk management and financial success of the banking sector. This provides local banks with a competitive advantage in accessing global capital markets.