By The Islamic Globe
The Islamic Globe has learned that four months after Qatar ordered conventional banks to quit Islamic banking, there has been little progress by the conventional banks to dispose of their Islamic assets.
It was expected that mainstream lenders would have to auction off their Islamic units in the wake of the Qatar Central Bank decision, but any significant sell-off is yet to materialize, said Salah Jaidah, Deutsche Bank’s chief country officer in Qatar.
“Early settlements have not taken the momentum we first thought,” he told The Islamic Globe, “The key is to package your Islamic services as an M&A opportunity for Islamic banks to acquire. But this hasn’t happened yet.”
In February’s shock move, QCB said it would shut down the conventional banks’ Islamic operations by the end of the year amid worries over the comingling of funds.
The Commercial Bank of Qatar has opened talks on selling its Shari’ah compliant book of business, while Qatar Islamic Bank, the country’s second-largest lender, confirmed its interest in potential buyouts.
However, to date it’s all paper talk and nothing much has
happened on the ground, which has undermined hopes
among
Islamic banks of a dramatic change in market share.
Shahzad Shahbaz, CEO of investment bank QInvest, said to The Islamic Globe: “If conventional banks can sell their Islamic business for close to the value of wind down then they’ll probably do it.”
But other bankers said off the record that after years of investment, banks are wary of making a sale that could put them at risk of a hefty loss.
It also emerged that many retail customers at non-Islamic institutions refuse to switch deposit accounts, citing concerns over quality of service available from the Islamic banks, hence removing the opportunity for the Islamic banks to increase their customer base quickly.
Conventional banks have a “loyal customer base,” said Kavitha Chakravarthy, a financial services consultant at analyst Frost & Sullivan, who added that clients and staff will also remain faithful.
Qatar has seven conventional banks, four Islamic lenders and seven foreign institutions. Last month, HSBC said it will shut down its Islamic banking window in Qatar by the end of the year.