DOHA, Feb 14, 2011 – Qatar\’s order that conventional banks stop offering Islamic banking services will have a negative impact on those banks and benefit Islamic ones, Moody\’s rating agency said on Monday.
"The loss of Islamic banking franchise is credit-negative for Qatari conventional banks, which derive 10-15 percent of their yearly earnings from Sharia-compliant banking," Moody\’s said in a statement.
It added that Islamic banks will benefit from access to a larger pool of customers and have better profit margins.
Qatar Central Bank last week ordered conventional banks to stop offering Islamic banking service and to wind down their existing balances by the end of the year.
The credit-rating agency said conventional banks would lose between eight percent and 16 percent of their deposit base, total assets and profits.
Worst affected will be the largest commercial bank, Qatar National Bank (QNB), which has a 39 percent share of the Qatari banking market, and a 20-percent share of the Islamic banking market, Moody\’s said.
The Commercial Bank of Qatar and Doha Bank, the second and third-largest commercial banks in Qatar, have 12 percent and nine percent of the market respectively.
Meanwhile, Qatar Islamic Bank has a nine percent share of total assets, while Masraf Al Rayan and International Islamic Bank have shares of five percent and four percent respectively.