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Doha: The asset quality of Masraf Al Rayan is expected to remain healthy and is expected to remain cost efficient, according to a report by QNB Financial Services (QNBFS). Masraf Al Rayan’s merger with Al Khalij Commercial Bank and its Foreign Ownership Limit (FOL) increase to 100%, should help boost Masraf Al Rayan’s weight in major indices such as MSCI EM and FTSE EM and contribute to increased foreign institutional ownership in the company.
Masraf Al Rayan had announced, on November 30, the successful completion of the merger with Al Khalij Commercial Bank. Post the merger, Masraf Al Rayan is the remaining legal entity, which continues to operate in accordance with Islamic Shari’ah principles.
“Asset quality to remain superior as Masraf Al Rayan’s primary exposure is to the public sector; management has been booking large precautionary provisions (because of the COVID-19 pandemic) since 2Q (second quarter of) 2020,” noted QNBFS in a report. “Asset quality to remain healthy as NPLs are strongly collateralized,” it added.
Masraf Al Rayan’s merger with Al Khalij Commercial Bank is a turning point in Qatar’s banking sector, which will enable growth for corporates facilitating landmark deals, fostering SME development and lending and supporting prosperity for our private clients to manage and grow their wealth and for our retail customers to reach their potential. With over QR182bn in total assets, Masraf Al Rayan is one of the largest Shari’ah compliant banks in the region. With a robust capital position, and strong liquidity, the bank is in a prime position to accelerate Qatar’s journey towards Vision 2030.
QNBFS expects bank’s earnings to grow by a compound annual growth rate (CAGR) of 10.2 percent. “We estimate the bottom-line to grow from 2020’s pro forma QR2.73bn to QR4.44bn by 2025e, driven by healthy growth in net operating income (resulting from cost synergies) and normalizing CoR,” said the report.
Loans are estimated to increase by a CAGR of 5.3 percent in 2020-25. “We estimate loans to increase from 2020’s QR119.9bn (pro forma) to QR155.5bn by the end of 2025. We expect loan growth to be driven by the public sector,” noted the report.
