In 2006, Qatar's leading financial institution, the Qatar Islamic Bank (QIB), nearly doubled its net profits and continued its strong programme of expansion.
Established in 1982, QIB is ranked among the world's leading Islamic banks, and has been a pioneer in the industry, working for international acceptance of Sharia-compliant financial instruments. Now, 24 years on, QIB's policy of careful growth combined with a keen eye for investment is paying dividends.
QIB has been so successful in the past year that the company has opted to offer shareholders a 70% cash dividend rather than consider a capital increase through the stock market as it did in 2005 when it raised its share capital by 70%.
Announcing the bank's results for 2006 on January 23, CEO Salah al-Jaidah said that, given that shareholders' equity has already grown by 100%, QIB had the existing capital to take care of further expansion.
The distribution comes on the back of a record year for QIB, which posted net profits of $277m, a massive 98% increase on its 2005 results. Overall, the bank saw its assets rise from $2.6bn to $4bn during the course of the year and the level of investments move from the $438m in 2005 to $795m. Its return on investments improved from 5.9% to 8.3%, one of the best for banks in the region, al-Jaidah said.
Of QIB's operating profit, 60% came from lending, which al-Jaidah said had been spurred by strong demand in the Qatari economy, while investments accounted for the remaining 40%, especially gains from real estate sold by funds the bank manages in Europe.
While the press conference in Doha was called to release last year's figures, it also served as a platform to unveil the bank's ambitious programme for the future expansion.
The bank plans to increase the current number of branches from 15 to 21 by the end of the year, having already locked in a deal with the Al-Meera chain of stores to have a presence in each outlet, and pump $1bn into real estate developments in Doha.
QIB has also announced it will enter the home mortgage market, give long-term housing loans under the finance lease for properties within the development scheme. The bank also intends to step up its support to small- and medium-sized enterprises (SMEs) through a trade financing service.
The bank also announced plans to consolidate its position in Europe, having applied to the Financial Services Authority in the UK to open a $50m joint venture finance house in London, in which QIB would hold a 51% stake.
On January 19, the Asian Finance Bank (AFB), a $100m joint venture between QIB and other investors from Malaysia and the Gulf such as RUSD Investment Bank of Saudi Arabia and Global Investment House of Kuwait, opened its doors for business. The new bank, in which QIB has a 70% stake, has been set up to provide consumer, corporate and investment banking services in Malaysia, but will look to expand into Singapore, Indonesia and Brunei.
The good news for QIB stakeholders kept on coming in January, with Fitch, a leading international financial ratings agency, giving the bank an "A-" rating and assessing its future as stable.
QIB is also about to launch the International Investment Bank of Qatar, otherwise to be known as Q-Invest, with the object of playing an increased role in project financing in Qatar. The new operation will have an authorised capital of $1bn and paid-up capital of $500m, with Abdullatif al-Meer, QIB's current business group general manager, as its CEO.
When releasing QIB's 2006 results, CEO al-Jaidah said that the year had been the most eventful in the bank's history. With new operations starting in Asia, branching out into Europe, launching a new investment arm and expanding its domestic activities into the housing and SME markets, the odds are that 2007 will be just as eventful if not more so.