Amid talks of a merger between is bank and two others, Omar Bouhadiba, managing director International Bank of Qatar (IBQ), talks about the domestic market, mitigating impacts of the blockade, banking innovations and what-if scenarios.
Global Finance (GF): How was IBQ affected by the blockade in 2017? Was the funding mix impacted at all?
Omar Bouhadiba: IBQ’s business is very domestic in nature, and our client franchise is exclusively focused on Qatari companies and individuals. As the blockade unfolded, despite the potential negative repercussions of such a dramatic event, IBQ’s Qatar-focused business model ensured a negligible impact. What could have been seen by many as a lack of geographic diversification turned out to be a blessing in disguise for us. The Bank’s reliance on regional funding in June 2017 was close to zero and repaying the few cross-border deposits that were on our books, as they matured, was a non-event.
GF: What is the current status of the possible merger with yourselves, Masraf Al Rayan and Barwa Bank?
Bouhadiba: Detailed due diligence has been conducted during the year and continues, given that the merger negotiations are ongoing. As there are three institutions involved, coupled with the mix of Islamic and conventional banks, this process has been more complex than usual. The regulator has been closely involved and has been very supportive from the start. The deal, if it materializes, would result in the second-largest bank in the country, and one of the largest Islamic banks in the region.
GF: How is the domestic market performing? Are there still good growth opportunities in the Qatari market? If so, in what areas?
Bouhadiba: Qatar’s economy has proven its resilience and continues to perform well amid the current circumstances. Liquidity has improved and bank lending has returned to its normal levels. Most banks have actually announced very decent figures for 2017, in spite of the circumstances. While there was initially some disruption to traditional trade flows, alternative arrangements had to be made.
The private sector continues to adapt in seizing new opportunities, and [IBQ] has seen significant investments in areas such as consumables, food production and logistics. Construction, too, still offers opportunities, and infrastructure projects continue to be regularly offered for tender, although we haven’t seen megadeals recently.
GF: Have you launched any new banking products or services recently?
Bouhadiba: IBQ is constantly engineering new Retail Banking [division] products to address market needs, and the ability to offer these new products to customers continues at a rapid pace. There are endless examples, including credit cards. Private Banking is constantly structuring tailor-made solutions for investors, which are then often white-labelled to other customers; while Corporate Banking is offering cash-management solutions, with collections and lock boxes to assist those clients that are handling large volumes of cash and checks. These are a few examples of a very long list.
GF: How is the Private Banking division performing? Are there still good prospects here?
Bouhadiba: IBQ’s Private Banking operation has been consistently voted as the best in the country. Year after year, clients and competitors recognize it for what it is—an extremely focused, service-driven operation where client interests come first and relationship is everything.
GF: What are the short- and medium-term strategies for IBQ?
Bouhadiba: Currently, IBQ is planning for two possible scenarios, depending on whether the merger is successful. In the event the merger happens, IBQ will focus on the integration process, the extraction of cost synergies, and leveraging each other’s franchises to create a more efficient and successful merged entity. The immediate challenge for the newly formed institution will be to integrate systems and to ensure that the best people are engaged to create a sound platform. Cultural differences will no doubt emerge and these will have to be “smoothed out,” as a cohesive corporate culture will be a key component to the success of the future institution.
On the other hand, if the shareholders decide to continue their own separate paths, IBQ will continue to implement its strategic plan, which is now in its second year of execution. The priorities will continue to be to grow the client franchise of this bank, especially in corporate and private banking; increase market share in order to become a much more significant player in the Qatari market; and deliver sustainable operating revenue growth to shareholders. Quality of revenue and risk management rank very highly in the Bank’s list of strategic priorities as does service excellence, which is ingrained in this Bank’s DNA.