Masraf Al Rayan: Banking

THE COMPANY: Masraf Al Rayan (MARK on the Qatar Exchange) is the country’s fourth-largest bank, with a 7.9% market share based on total assets in the overall domestic banking sector as of 2011. It is also the second-largest sharia-compliant bank in the country. Besides Qatar, the bank also has a presence in Saudi Arabia. The company has established itself in Qatar within a relatively short period and has brought innovative products and services to the market. MARK operates through several subsidiaries. Al Rayan Investment (ARI), based in Doha, was established in 2008 and provides investment banking and asset management services in Qatar and across the GCC, with a focus on real estate and financial advisory. Al Rayan Financial Brokerage, incorporated in November 2010, commenced operations in 2012. MARK also holds indirect ownership of 51% and 100% in Sapura Crest and Al Rayan Partners, respectively, through Al Rayan Investments. MARK’s associate companies also include National Mass Housing, CI San Trading, Kirnaf Investment and Instalment Company, Daman Insurance (Beema) and Lusail Waterfront Real Estate Company. MARK reported net profit of QR371.7m ($102.1m) for the second quarter of 2012, up 5.1% quarter-on-quarter (q-o-q) from QR353.5m ($97.1m) in the first quarter. Income from financing activity increased to QR407.7m ($112m), a 3.2% q-o-q rise. Income from investing activities rose by 0.6% over the first quarter, reaching QR157.7m ($43.3m). Therefore, total income from financing and investing activities jumped to QR565.5m ($155.3m). Net fees and commission income was up 13.1% q-o-q to QR29.8m ($8.2m). Other income declined to QR2.7m ($741,400) in the second quarter, compared to QR26.1m ($7.2m) in the first quarter of 2012 and QR172.8m ($47.5m) in the second quarter of 2011. Payment to unrestricted investment account holders increased by 11% q-o-q to QR172.9m ($47.5m) in the second quarter of 2012. The loan book increased by 5.6% over the first quarter of 2012 to reach QR38bn ($10.4bn), while combined deposits (current accounts and equity of unrestricted investment account holders) grew by 5% q-o-q to QR51.2bn ($14.1bn). As a result, the loan-to-deposit ratio increased to 74.2% from 73.8% at the end of the second quarter of 2012. MARK has 20.1% of its assets invested in financial investments. The capital adequacy ratio stood at 17.5% at the end of June 2012.

Looking back to 2011, MARK posted a QR197m ($54.1m) improvement in net profit, equivalent to a rise of 16.3% over 2010. The primary driver for the improved performance was income from investment returns from debt-type instruments, which contributed QR597.6m ($164.1m) in 2011 versus QR68.9m ($18.9m) in 2010. Net fees and income increased by QR150.9m ($41.4m), or 158.5%, y-o-y. General and administrative expenses rose by QR78m ($21.4m), and impairment losses on financial investments increased by QR69.4m ($19.1m).

The bank declared a cash dividend of QR0.5 ($0.14) per share in 2011. Total assets grew by QR20.6bn ($5.7bn) y-o-y to reach QR55.3bn ($15.2bn) in 2011. The growth was driven by an QR9.9bn ($2.7bn) y-o-y increase in financial investments, primarily in debt-type instruments. The growth in assets was funded by an QR16.4bn ($4.5bn) y-o-y increase in equity of unrestricted investment account holders in 2011. Customers’ current accounts rose by QR2.9bn ($796.3m) y-o-y, and total shareholder equity added another QR1.4bn ($384.4m) in the y-o-y increase for 2011.

DEVELOPMENT STRATEGY: MARK’s principal strengths include the highest loan exposure to fast-growing public sector volumes among Islamic banks. MARK offers a whole suite of products including corporate finance and advisory, financing products, cash management, treasury, trade finance services, current and savings accounts, time deposits, financing, credit cards, kids’ accounts, pay and go prepaid cards, and other banking services. MARK has been gaining market share from its peers and is also actively seeking international and regional opportunities for expansion. We expect the bank to post double-digit growth in the coming years.