Dr. R. Seetharaman, CEO, Doha Bank Group

24 Feb 05:38 AM

Sector : Banking & Finance Country : Qatar

Banking Doha, the GCC, India and Beyond

Doha Bank was established in 1979, and is the fifth largest bank by assets in Qatar. Doha Bank has started on an international expansion strategy, and was recently awarded a license to operate in India. The bank expects to increase the share of revenues from overseas to 50 percent in five years, from the current 10 percent of total revenue. In the first nine months of 2013, Doha Bank recorded a net profit of $296.5 million, achieving a growth rate equivalent to 18.4 percent in the return on average equity and a growth rate of 2.43 percent in the return on average assets. B'Here met with Dr R. Seetharaman, CEO of the Doha Bank Group, to discuss the bank's strategy and the country's banking sector.
Dr R. Seetharaman joined Doha Bank as assistant general manager in 2002, and became the CEO in 2007. Prior to joining Doha Bank, Dr. Seetharaman held executive management positions in three banks in Oman, handling all domains in banking. He started his professional career at global consultancy firm PWC.


What’s your assessment of Qatar’s economy today? 

Qatar’s economy must have grown close to 6 percent in 2013, mainly on account of expansion in the non-hydrocarbon sector. The public investments are expected to pick up this year and drive the non-hydrocarbon sector.

Construction activity is expected to pick up as government is set to invest heavily in economic infrastructure over upcoming years, particularly local roads, expressways, the Doha metro and rail. The current account surplus as a percent of nominal GDP is expected to be above 20 percent this year. Fiscal buffers and natural resources are sizable and spending is unlikely to be affected by a drop in hydrocarbon prices or market volatility in the near term.

The Qatar Central Bank (QCB) can inject liquidity into the financial system through its lending window and repo operations, and the government could achieve the same goal by managing portfolio allocations of the Qatar Investment authority (QIA) and public sector enterprises.

How do you see the local banking sector and how has it matured in recent years? 

The banking system remains profitable with a return on assets at 2 percent. Liquidity buffers are strong, with liquid assets around 50 percent of total assets. 

Commercial banks’ Tier 1 capital stood at 15 percent of risk-weighted assets at end- 2013, and non-performing loans (NPLs) remain below 2 percent despite their recent slight increase. Foreign funding of commercial banks which increased substantially in recent years has been pared back from 30 percent of total liabilities at its peak in early 2012, to about 2 percent by end of 2013, and its maturity structure has improved, with short-term loans gradually replaced by longer-term Securities. The QCB has come out with guidelines for implementing capital adequacy and liquidity under Basel 3 in 2014, and Qatari banks will adhere to it.

In the wake of tough competition what is your outlook for Doha Bank in the year ahead? 

The competition is fierce in the local market, with 18 local and foreign banks serving a population of just 2 million people. Some of the Qatari banks including Doha Bank have ventured into geographical expansion beyond Qatar.

Doha Bank has pursued organic expansion up until now, getting approval to start operations in India in December 2013, which will commence in 2014. Doha Bank will employ the GCC model in India, customized to India.

Doha Bank has been raising its reserves to improve its capital ratios. Was this to meet Basel requirements, and/or to be on par with local competitors?

Doha Bank has raised capital in 2013, to enhance the shareholders’ equity base and support the bank’s prospects for achieving its strategic goals at the local, regional and global levels. It will also strengthen the bank’s lending capacity and improve its competitive edge, especially keeping in view the anticipated boom in various economic sectors in Qatar in the coming years. After the rights issue and Bond sale as of December 2013, Doha Bank’s tier 1 capital ratio stood at 16.6 percent, which will also enabled it to comply with Basel 3 requirements.

Over the past year Doha Bank has provided loans and financing to QPI and other blue chip companies. What’s on the horizon in terms of financing, and how do you rate the overall financing environment in Qatar? 

In 2013, the lending growth was more than 13 percent in Qatar. The main sectors which contribute to Qatar’s lending growth include the government sector, contract sector and retail sector registering a credit growth of more than 9 percent, 12 percent and 40 percent respectively in 2013. The foreign currency lending continued to drop in 2013.

You are keen to expand operations in the UAE, such as committing $1.5 bn to support SMEs and corporate clients. Why the focus on the UAE, and what experiences from supporting SMEs in Qatar will you take to the UAE and other Gulf countries?

 SMEs contribute to over 60 percent of the UAE’s GDP and provide around 86 percent of employment in the private sector. Traditionally banks have been the main source of small business funding in the UAE with loans awarded on a name lending basis to limit risk exposure.

Last year, Doha Bank was granted a license to start operations in India. What was the motivation to enter the Indian market and what are your expectations?

India has a huge bilateral trade and development not only with Qatar or GCC countries but also with most of the global locations where Doha Bank is already present such as Japan, China, South Korea, Singapore and Australia. Most of the GCC countries and those countries where such global locations are located appear in the list of “Top 25 leading trade partners of India” in recent times. The banking license in India will enable Doha Bank to cater to the banking needs of not only Qatari, GCC and Indian corporations but also support the global network of Doha Bank which has 11 representative office located around the world. Qatar-India bilateral trade was over $16 bn in 2012-13, and GCC-India trade was close to $160 bn.

Doha Bank with its full scale operations at strategic locations like Doha, Dubai, Abu Dhabi and Kuwait can bring advantage and value addition to its investors. Initially Doha Bank aims to capitalize on the large number of Indian expatriates and Indian companies in Qatar as well as the wider GCC region.

Doha Bank will also focus on Indian corporate targeting the GCC. Furthermore, Doha Bank will focus on the remittances segment and also on retail products and wealth management products to non-resident Indian (NRI) customers in India. Doha Bank will leverage on GCC networks and support the clients at both the ends.

What’s the purpose behind the inception of the ‘Al Hayer Fund’ and how it has performed so far? 

Al Hayer Fund is open to Qatari individuals, corporates and institutions seeking medium to long term capital growth in the GCC markets. Al Hayer Fund is designed to invest in blue chip high performing equities in the region to reflect the overall growth in economic activity. The fund performance has been posting excellent gains of 12.86 percent since its inception in September.

The fund offers a unique proposition in Qatar as most funds available in the country invest primarily in Qatar based equities. 

Al Hayer Fund is unique in that it invests in the GCC markets and aims to deliver above average returns with below average risk through investing in a diversified and carefully selected portfolio of companies across major market sectors. The fund offers investors’ diversification benefits covering multiple countries and sectors coupled with ease of investment through a simple application and subscription process followed by NAV (Net Asset Value) updates for all investors to help them keep track of the performance during the investment period.

Will Qatar Exchange’s upgrade in the MSCI Index from frontier to emerging market status in May, 2014, boost the bank’s Al Hayer Fund? And what impact, in general, will the upgrade have on Doha Bank? 

In Qatar and the UAE inflows of $500 mn are expected as funds that track the index take positions in the Qatari market. As of February 2014, many active funds have already taken the lead with net foreign portfolio investments in Qatar reaching circa $700 mn in 2013, and $650 mn until February 2014, versus an outflow of $900 mn in 2012. The Al Hayer Fund, which is a GCC fund, is benefiting from the foreign inflows, as reflected in the excellent performance of the fund. The attractive valuations, excellent dividend yield, stable loan growth and contribution to Qatar’s growth story will enable Doha Bank to be considered as an attractive stock for foreign investors.


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