#Qatar# Islamic #Bank #offers #certificates of deposit after Q2 outflow – Nasdaq

The Qatar Islamic Bank aims to boost its deposit base by offering certificates of deposit in Qatari riyals and US$, after it was hit by an outflow of money due to sanctions against Qatar by its neighbouring Gulf countries. The bank said this weekend, that it was offering 1 and 2 year CDs in its 2nd series of such papers. Its first series was launched End of 2015. Saudi Arabia, the United Arab Emirates and Bahrain cut diplomatic and transport ties with Qatar beginning of June this year, accusing the country of supporting terrorism. This prompted some firms and individuals from those states to pull money out of the Qatari banks. As a result, deposits in the Qatari banks shrank 1.8 % from the previous month in June. Qatar Islamic Bank was particularly hard hit, with its customer deposits falling to US$26.6 billion at end of June, according to its financial statements.

Qatar Islamic Bank's new 2-year CDs offers a rate of 3.75 % for riyal-denominated papers and 2.75 % for US-Dollar papers. Those rates are 1 % point higher than rates offered for similar papers in Qatar Islamic Bank's first CD series in 2015. Central bank data indicates Doha's sovereign wealth fund and possibly other government institutions deposited over US$10 billion in local banks during June to offset the impact of deposit withdrawals, although it was not revealed whether Qatar Islamic Bank obtained some of those funds. The banks chief financial officer, Gourang Hemani, said that the CD offer was a regular business product which the bank offered to its clients. Redmond Ramsdale, senior director in the banks team at Fitch Ratings, said Qatari banks were doing their best to prop up their funding profiles. "A lot of this is due to the political dispute, as banks are encouraging particularly non-domestic deposits to stay with them. The best way to do that is with more yield."

Partly because of the diplomatic crisis and partly because of rising U.S. interest rates, which affect Qatar through ist currency peg, the cost of interbank funding has risen sharply. The 6-month Qatar interbank offered rate is above 2.60 % compared to 2.23 % at the start of June. As a result, bank deposit rates in Qatar generally are under upward pressure, noted Dima Jardaneh, head of economic research for the Middle East and North Africa at Standard Chartered. "Qatari banks need to diversify their sources of funding. They have to shore up their deposits raising funds domestically, so it is to be expected to see higher rates."