QATAR"S BANKS SET FOR FURTHER LEAN SPELL
Bank profits in the Gulf oil state of
Qatar are coming under renewed pressure and foreign banks are
retrenching further in one of the region"s most overbanked
markets.
    Results for 1986 show a year of declining profit for
several foreign banks, although locally-owned operations were
in some cases able to cushion the drop by increasing market
share.
    <Qatar National Bank SAQ>"s (QNB) General Manager, Abdulla
Khalid al-Attiya, said: "The economy is not improving as we
hoped... 1987 will be another difficult year for the banks."
    Oil-dependent Qatar, with a tiny indigenous population of
60,000 to 80,000 and an expatriate workforce estimated at about
280,000, boasts five local banks and 10 foreign bank
operations.
    Local and foreign bankers in the capital said the Gulf-wide
recession, aggravated this year by Qatar"s severe difficulty
marketing its crude oil at official OPEC prices, has taken a
heavy toll on the economy and bank profitability.
    As a result, the only U.S. Bank, <Citibank NA>, is thought
to be negotiating to sell its operation to the fast growing
locally based <Al Ahli Bank of Qatar QSC> which only started
operations in 1984, bankers said. Citibank would not comment.
    Other foreign banks have retrenched, with <Standard
Chartered Bank> cutting staff and others expected to follow.
<Banque Paribas> is examining a change in its status to admit
51 pct Qatari ownership in a bid to improve its access to local
business, bankers said.
    One banker added: "Weak profits are here to stay for the
time being. There is no cause for optimism at the moment."
    Sentiment had picked up briefly at the end of last year
when OPEC reached its accord to curb oil output and return to
fixed prices. However, it soon became apparent that Qatar was
having difficulty selling oil at OPEC prices.
    The soft spot oil market has left official Qatari crude
prices 20 to 40 cents more expensive and sales have been
running in recent weeks at 100,000 and 120,000 barrels per day,
well down on the nation"s OPEC quota of 285,000, oil sources
said.
    Bankers said this serious shortfall in Qatar"s revenue has
led to a new spate of payments delays from the public sector to
private contractors after a marginal improvement in January.
    Loan loss provisions continued to eat into bank profits
last year, as did the introduction of minimum reserve
requirements by the Qatar Monetary Agency. Trade financing has
almost dried up as a traditional source of bank income.
    Of the local banks, QNB conducts the bulk of the
government"s business and subsequently enjoys a huge advantage
its rivals cannot expect to match, bankers said.
    The bank reported a 2.9 pct rise in net 1986 profit to 93.1
mln Qatari riyals, while its balance sheet grew by 10.8 pct to
9.0 billion, making it by far the largest bank in Qatar.
    But the strong assets growth partly reflected bridging
loans for the public and private sector to tide government
departments and local business over the lean economic spell,
Attiya said. "Generally speaking, we are overbanked in Qatar," he
said, echoing a widespread feeling in the banking community.
    Other local banks fared less strongly. The second largest,
<Doha Bank Ltd QSC>, reported a 13 pct drop in net profit to
27.5 mln riyals, while <Commercial Bank of Qatar Ltd QSC>,
registered a decline to 18.5 mln riyals from 19.4 mln in 1985.
    The newcomer Al Ahli Bank, continued to expand rapidly and
reported net profit of 5.2 mln compared with 3.3 mln during the
start-up period from August 4, 1984 to end-1985.
    Bankers said the local banks had clearly begun to win
commercial deposits previously held by foreign banks,
increasing already strong pressure on non-Qatari banks to
reexamine their staffing levels and overheads.
    <Grindlays Bank PLC> recorded a net loss at its Doha branch
last year of 4.7 mln riyals after registering a nominal profit
in 1985 of 12,000 riyals.
    Two other long-established banks in the Gulf, the <British
Bank of the Middle East> (BBME) and Standard Chartered, also
found last year a difficult climate to make strong profits.
    BBME"s net profit fell to 3.2 mln riyals from 10.4 mln in
1985, but Assistant Manager John Farquharson said 1985"s result
had been artificially inflated by tax rebates on provisions.
    "Foreign banks are seeing their assets decline, while local
banks are increasing their market share," Farquharson said.
    BBME"s operating profit was steady in 1986, edging up to
12.3 mln riyals from 11.5 mln in 1985. "We are expecting the
same level of operating profit in 1987," Farquharson said.
    Standard Chartered"s net profit last year recovered slightly
to 1.6 mln riyals after a loss of 161,000 in 1985. Staff
numbers were cut last year to reduce overheads.
    Bankers said the lack of new construction projects in Qatar
means business is unlikely to pick up this year although hopes
are rising that the start of Qatari gas exploitation could
provide a boost. But the threat of higher U.S. Interest rates
may erode bank deposits as savings are moved offshore.
 REUTER
