HSBC's Islamic business is attempting to clarify the Qatari Central Bank's decision that requires non-Islamic lenders in the country to stop services that are Shariah compliant.
HSBC in Qatar talks after Islamic banks ruling
HSBC is in talks with Qatar's central bank as fears emerge that a recent order to close some Islamic banking operations in the country will hit lenders' revenues.
Shares in some conventional Qatari banks that offer Islamic products were hit hard yesterday after a central bank decision to restrict such activity to Sharia-compliant banks.
International banks such as HSBC, which has had a presence in Qatar since 1984, derive up to a fifth of their revenue from Islamic products, analysts say.
HSBC declined to comment on the ban or its possible impact on revenues, but a spokesman told Bloomberg that the bank is trying "to find a workable solution".
"We are communicating with the Qatar central bank to seek clarification on this issue," said a spokesman for HSBC Amanah, the Islamic division of Europe's largest bank.
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Shares in Qatar National Bank (QNB), which although a conventional bank has the nation's biggest market share in Islamic banking with 27 per cent, fell 1.8 per cent yesterday to 136.4 rials.
QNB's Islamic unit accounted for 16 per cent of the bank's net profit at the end of last year and about 14 per cent, 20 per cent and 17 per cent of the bank's assets, loans, and deposits, respectively.
Commercial Bank of Qatar and Doha Bank have small Islamic banking businesses and are less likely to be affected, said Raja Ghoussoub, the chief financial analyst at NBK Capital.
Doha Bank fell 1 per cent to 59.50 rials. Commercial closed up 2.34 per cent to 87.50 rials.
"Closing down all Islamic operations in this relatively short period of time may create undue stress," Mr Ghoussoub added.
Masraf Al Rayan, which has the country's second-largest Islamic banking business, was a gainer on the exchange yesterday as it added 3.5 per cent to 23.92 rials.
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"Islamic banking is a big part of conventional banking and stripping this out is a big issue," said Khaled Masri, head of brokerage at Rasmala Investment Bank.
The directive, released to banks last Tuesday, called for non-Sharia-compliant banks to close Islamic branches by the end of the year and to stop taking deposits in those units immediately.
The central bank's circular did not state a reason for the order, but it is thought to be an attempt to separate conventional and Islamic financing to prevent the income from conventional banking contaminating halal banking, said Mr Masri.
"There's clearly a need to regulate Islamic finance and the separation of the two will certainly help, [but] the problem is the market doesn't like uncertainty and people have been caught unawares," said a banking analyst from an international bank, who did not want to be named.
The central bank has been accused of not communicating in sufficient detail with the financial community on its strategy with regard to Islamic banking.
The central bank "has been quite abrupt and brief with how much time banks have to comply," said Mr Masri.