A Middle East "superbank" with the financial clout to outperform local rivals in foreign markets will emerge within the next decade, says an executive at a Qatari bank who is trying to make such a scenario a reality. "We continue to look for other acquisition targets because we want to be a truly regional bank," said George Nasra, the managing director of the International Bank of Qatar (IBQ), adding that Saudi Arabia would be an obvious target.
Mr Nasra said the proposed superbank would do well to emulate Santander by using "serial acquisitions" to enter and dominate new markets around the Gulf during the next five to 10 years. He said while "local champions" had started to emerge in the Middle East, these banks lacked muscle compared with established rivals in the West. "While impressive in operations and growth rate, few are venturing outside the boundaries of their local marketplace to generate business," he said.
"Compared to their global counterparts, they still lack in size despite their impressive growth. "[Even] combining the 10 largest banks in the Middle East will not match some international players." However, Mr Nasra said legislation in Middle Eastern markets restricted that possibility. "Unfortunately, regulation is the main obstacle," he said. His comments sounded an uncharacteristically bold tone for the Qatari banking sector, which has focused on local markets rather than expanding internationally.
Expansion overseas would mirror similar moves in the property sector, where Qatar has taken stakes in Songbird Estates, the owner of Canary Wharf in London, and acquired the luxury store Harrods in the UK capital in the past few years. Qatar National Bank, the country's largest and which accounts for about half of all assets under management in Qatar, has launched operations in Sudan, Syria and Jordan and gained approval to enter Lebanon this year.
Qatar Islamic Bank is also flush with cash to invest overseas, with a capital ratio of 17.33 per cent, according to data from Bloomberg. IBQ is 30 per cent owned by National Bank of Kuwait (NBK) and both banks have been on a spending spree in recent years that has seen their combined customer base triple. The creation of a regional superbank would be a direct challenge to foreign banking titans such as Barclays, Standard Chartered and HSBC.
However, Rick Crossman, the UAE head of personal finance at HSBC Middle East, said regulatory changes to make such a move more feasible would be worth pursuing. "We always welcome competition and the opportunity to open markets would also benefit HSBC. We also deal with restrictions on growth and expansion," he said. "As long as the playing field is equal, I think we'd be very comfortable." Tarik el Majjed, an analyst at Nomura, said regional expansion would be one way for banks to continue to expand their operations in light of the recent circular from the Qatar central bank, which announced limits on the amount of Islamic lending conventional banks can offer.
He said in most GCC countries foreign banks were able to open only a handful of branches, making acquisitions a more credible way to expand overseas. "It's too difficult for another bank to enter the market through organic growth," he said. "It's not enough to be a serious competitor in the market."