OBG talks to Sheikh Hamad bin Faisal bin Thani Al Thani, Chairman, Al Khaliji

Interview: Sheikh Hamad bin Faisal bin Thani Al Thani

What are the most significant factors driving loan growth in the Qatari banking industry?

SHEIKH HAMAD BIN FAISAL BIN THANI AL THANI: We are in the midst of unprecedented structural growth that is transforming the face of Qatar. The capital expenditure associated with the country’s infrastructure sector will be the key driver of loan growth. Qatar recognises the need to deliver enhanced infrastructure to keep up with our plans for growth by investing in multiple projects, such as roads, power plants, hotels, and the oil and gas sector.

The National Development Strategy committed $225bn worth of spending from 2011 to 2016, with the private sector and government-linked organisations accounting for $75bn of the total. Our current aim is to strengthen the transport and utilities sectors. There has been a marked increase in activity over the first six months of 2013, with the award of contracts worth $28bn. We have also experienced an accelerated rate of growth in the construction sector, where first-quarter growth was almost 12% year-on-year.

In what ways is the banking sector helping to fund the state’s infrastructure requirements?

SHEIKH HAMAD: Qatari banks are gradually building up their capital bases and project finance expertise in order to strengthen their ability to participate in more big-ticket deals. This would allow them to take on tasks such as underwriting and lead arrangement roles, to support large infrastructure projects. Banks will provide long-term funds to finance the development of these projects according to their feasibility as well as expected cash flows. They will also continue to accommodate the requirements of local and international contractors involved in the execution of these projects.

How would you describe the environment for local project financing in the private sector?

SHEIKH HAMAD: The government is providing various incentives to encourage private involvement in the economy by setting up industrial areas, establishing the Qatar Financial Centre and providing costeffective energy. The private sector is also the cornerstone of major real estate developments in the last five years, particularly when it comes to residential complexes, shopping malls, hotels and offices. It is also worth noting that most real estate investments emanating from the private sector have been financed through bank debt, with only limited access to the capital markets. This is due to the fact that most of these companies lack credit ratings and are only gradually reaching the levels of disclosure required by global investors.

To what extent is there a mismatch between investors’ confidence in the Qatari economy and the risk appetite of the banking sector?

SHEIKH HAMAD: I would not accept that there is a mismatch at all. The economies of the GCC have grown at a remarkable pace since 2001. In this time, Qatar, through its astute commercial exploitation of natural gas resources, has become one of the most prosperous countries in the world. Levels of confidence have also increased owing to the government’s commitment to promoting the diversification of the economy across numerous sectors, for example in middle and downstream hydrocarbon-related industries such as petrochemicals and fertiliser, and further bolstered by the planned rollout of infrastructure spend.

Complementing this rapid pace of economic development, local banks have acquired a measured and balanced appetite for financial risk. In addition to financing capital expenditure projects, all domestic banks have also benefitted from associated peripheral activities, such as the funding of smaller projects, trade finance, current account administration of multinationals operating in Qatar, as well as granting personal loan facilities to locals and expatriates.

The unparalleled scale of opportunity that currently exists is mirrored by the strong confidence within the banking sector. This is clearly reflected in the substantial levels of growth displayed in their asset books.