Little to cheer from Qatar Islamic Bank

What's Down: Anticipated growth for Qatar Islamic Bank fails to materialise in 2011, with measures to force conventional banks to sell Sharia-compliant units providing little boost for the country's biggest Islamic bank.

Investors in Qatar Islamic Bank were left wanting this week after disappointing earnings from the Sharia-compliant lender.

The bank, based in Doha, had been expected to take large chunks of market share from conventional banks forced to shed their Islamic units last year .

Qatar Islamic Bank's stocks fell 3.1 per cent to 80.3 Qatari rials each after reporting profits of 1.3 billion rials last year, an increase of 2.2 per cent compared with the year earlier.

However, the earnings disappointed analysts who had been hoping for profits of 1.6bn rials. The decline pushed the Qatar Index down 1 per cent to 8,461.77. Qatar Islamic Bank had been expected to benefit from a central bank regulation splitting conventional and Sharia-compliant lenders, reducing the level of competition in the market for Islamic finance.

But a period of slack lending during the first three months of last year resulted in weak levels of credit growth for the full year, said Elena Sanchez-Cabezudo, the director of equity research at EFG-Hermes.

"Loan growth was weak, if you look at a year-on-year basis," she said. "But the outlook for the Qatari banking sector is quite positive for loan growth due to government investment, and they should benefit from this."

Lending increased 1 per cent compared with a year earlier to 29.6bn rials, although financing income rose by 22 per cent during the same period.

Investment income almost tripled during the year to 631 million rials, as the bank's investments in Qatari government sukuk swelled its investment portfolio.

The Qatari government sold sukuk to the banking sector in an effort to bolster balance sheets and prepare lenders to make investment needed for the hosting of the Fifa 2022 World Cup.

The bank also announced a 45 per cent cash dividend.

Meanwhile, Doha Bank also fell in trading, with the bank's stocks sliding 2.9 per cent to 63 rials.

The bank reported net profits for last year of 1.24bn rials, increasing 17.7 per cent from the same time a year earlier.