Doha Bank aims for 25% rise in profits - Emirates24|7

Doha Bank aims for 25% rise in profits


The main challenge for GCC banks is to globalise their operations and consolidate their presence in world markets in order to survive rapid changes in the international economy, says Ragavan Seetharaman, CEO of Doha Bank.
The increasing globalisation of banking and financial services is creating strong competition, so regional banks should increase their capital to expand their operations outside local markets, he adds.
The CEO also predicts differences over free trade in the Doha Round will create a shift in international trends. There will be a focus on free trade agreements within economic blocs and this will give investment, banking and financial firms and commercial services free access within these blocs.


How can GCC banks deal with the challenges of globalisation?
The regional banking sector is very prosperous at present. There is evidence for us to believe the regional economic growth will continue due to the surge in oil and gas prices.
The regional markets are opening up, the real estate sector is expanding and financial centres are being created in the region. The per capita income in the GCC region is surging by between 15 and 20 per cent annually.
The average growth of gross domestic product in GCC countries has reached 20 per cent annually and all GCC countries are generating fiscal and current account surpluses. Also sovereign wealth funds are increasing their investments to more than $1 trillion (Dh3.67trn), while infrastructure projects and industrial expansion projects under construction or planned, are estimated to be worth up to $5trn.
The banking sector will deliver more and more opportunities because all these developments will generate demand for its services. Even though the market has opened up to international financial institutions, local banks will continue to play an essential role and the challenge for them is to become global organisations.
The regional market is going global and local financial institutions should go global. Every business should take its natural course, and mergers and acquisitions in a globalised world are not an option, they are becoming a must.
The market is expanding very fast, and growing organically will take a long time because banks need to increase their capital. To achieve rapid growth acceleration they have to go for mergers.
However, mergers will not be the only option for all banks because some of them will be able to generate high capital through the support of their shareholders.
Do you think the regional banks should first consolidate their positions in local markets?
International competition is increasing and all markets, local and international, are facing the same pressures. Local banks should have strong positions in globalised markets to expand their operations.
The GCC region is rich and there are tremendous prospects for development in all economic areas, including banking.
I do not see a threat from international competition in the region, but there is an opportunity for local banks to grow and expand their operations.
Also each local market has its own needs, so when international banks move to new markets they have to meet the needs of local markets.
How is Doha Bank planning to go global?
The bank expanded in 2007 and we expect to increase our institutional operations by 25 per cent this year. We expect our profits to grow between 20 and 25 per cent this year. Doha Bank has been progressing during the last five years and has been awarded the Best Bank Award in Qatar for three executive years from 2005 to 2007.
Our rating by international organisations including Moody’s has gone up and we won the best bank in the Middle East award. We have 40 branches in Qatar and one branch in Dubai. We operate in Japan, Singapore, Turkey, China, Romania and the United States.
We launched Doha Bank Insurance Company to offer insurance and reinsurance services. We plan to add four branches in Qatar and at least four branches worldwide this year.  We have acquired licences to operate in Kuwait and South Korea and the two new branches will start operating within the next two months.
In the US, we plan to expand our operations to Houston and Washington. We plan to launch a full-range brokerage house as we have acquired a 49 per cent stake in a new company in India called Doha Brokerage and Financial Services.
Our strategy to go global includes offering services through operations in banking, finance, insurance and brokerage. This expansion will cover the Middle East, Asia, Europe and the US.
What is you exposure to the sub-prime crisis?
Doha Bank does not have any sub-prime exposure because we are not a major investor in the international real estate market. Our investments focus on the regional real estate market.
However, this crisis has cost $3.2trn so far and it will have a severe impact on the availability of credit. We are seeing major international banks facing difficult times. The crisis will have a great impact on developed financial markets.
I foresee that risk management will be tighter and credit and borrowing facilities will narrow. It is going to change the markets and we have to realise this is a changing face of the world and we have to be more cautious about these changes.
Markets with high exposure to the crisis are putting high pressure on borrowing, and these pressures will impact other markets in varied levels. The GCC market will face the same trend, but the impact will be less significant.
What lesson should regional bankers learn from this crisis?

Regional banks should operate in the real economy, not a financial economy, because we have a real economy in the GCC region, not a financial one. We should avoid high leverage because we saw that multiple leverage for one client played a major role in the sub-prime crisis.

Simple leverage is acceptable but multiple leverage is very dangerous. We see multiple leverage in advanced financial economies, but in the GCC region we have real economies so we, as bankers, should operate according to real economy rules.

Business leaders should create real enterprises and should make sure their companies have the best management practices and standards. Also transparency and social responsibility are essential. Business leaders should believe in achieving balanced growth in terms of customer service, shareholders, staff and regulators.

Lending played a role in the fluctuations seen on regional stock markets – could this affect the regional economy?

I agree lending was an essential part of the regional markets’ fluctuations. The markets are changing and they are going through a real correction trend.
However, economic indicators in the GCC region are very strong and stock markets will move smoothly through these corrections. Also foreign investments will add value to regional stock markets.
The entire regional economy is booming and stock markets will benefit from this progress in economic activities.
What changes do you expect to see in the banking sector as a result of the Basel II regulations?
Basel II came at the right time and was right for GCC regulators. We started this process in 2006. It rationalises the financial adequacy of banks and it puts controls on market risk, credit risk, operations risks, liquidity risk, interest rates risk and pricing risk.
GCC countries were ahead of other regions in implementing Basel II regulations and this will give us a momentum to offer very strong integrated risk management in regional financial institutions. The regulations will place restrictions on small and medium-sized enterprises (SMEs) with weak balance sheets.
However, the control of risk is the real game and SMEs can consolidate their positions through mergers to create strong economic bodies. Economic institutions in a global market should have a scale in the market and if this scale is weak they will vanish, so the best way to survive is to increase their capacity and capital base.
This is why Basel II will add value to the consolidation of financial services. Through Basel II, GCC regulators are looking for international best practices because international institutions cannot run their businesses according to local models in each country.
So regional regulators are taking positive steps to introduce new economic rules. Economies have to adapt themselves to international trends and regulators have to adapt national services with these trends to achieve better control over national risks.
What is the impact of disagreements in the Doha Round on the free movement of banking services?
The Doha Round faces difficulties essentially because of differences between developed countries and emerging markets. Developed countries want access to developing markets, while denying access to their own markets.
This creates protectionism and a tendency to create economic blocs. We see countries are coming together to have a common economic policy with their neighbours. We see free trade agreements among these blocs such as Asean, the European Union, the GCC and the North America bloc.
The rule now is that unless you have a free trade policy it will be impossible to promote investments, banking, financial services and trade.
Mature economies and emerging ones disagree, but at the end there are real changes in the global economic outlook and there is a shift in economic powers from the West to the East. The European economy is growing at less than three per cent and the US economy is growing at less than two per cent.
On the other hand we see high growth rates in other parts of the world – seven per cent in the GCC, the Middle East and Africa, nine per cent in India and 11 per cent in China. We have to respect these changes and adapt.


Ragavan Seetharaman

CEO of Doha Bank


Seetharaman held top management positions in three banks in Oman before joining Doha Bank. He graduated with a Bachelor of Commerce degree from the University of Madras in 1979 and has more than two decades of experience in banking, information technology and consultancy.
Seetharaman is a chartered accountant and a cost accountant and has certificates in corporate management and information technology systems.
He was presented with an award for the Best CEO in the Middle East Banking Industry 2008 by Dominique de Villepin, former Prime Minister of France. The prize from the Middle East Excellence Awards Institute was handed over at the Leading CEO Summit in Dubai.
Seetharaman has been Chairman and Director of Doha Brokerage and Financial Services since 2007.