Following is the full transcript of CNBC's interview with Ali Ahmed Al-Kuwari, CEO of Qatar National Bank. This interview broadcasted in Asia on Friday, 15 September 2017, 6.45AM SG/HK time.
All references must be sourced to a "CNBC Interview".
Interviewed by Amanda Drury, Contributor, CNBC.
Amanda Drury (AD): It's been over three months since the start of the blockade against Qatar. What do you think Mr. Al-Kuwari is behind all of this?
Ali Ahmed Al-Kuwari: Well this is not for me to talk about and it's very difficult to go up to that situation and analysis. But all I can say after three months after blockade, Qatar economy is very strong, the banking system is very strong. We have maintained our positions, we look to our growth targets, we have not adjusted any of our strategies or aspirations.
What happened I must give credit to our government, they moved very very quickly in terms of sourcing alternatives, in terms of like – because there was cut food supplies, medicine and that's immediately what sorted out, alternative routes were found. And as we go along we see being – the logistics have been almost figured out – as we go along the full logistics will be figured out even better, faster and cheaper. So this is the shock which was in the first few days as it happened - after the shock.
Qatar economy is very strong, as you know it's the richest country in the world. Qatar sits on very huge reserves, 300 billion dollars for Qatar investment authority alone plus 40 billion dollars from central bank reserves. The banking system is one of the best performing systems its rated AA- by S&P. And AA by other rating agencies and they just affirmed this rating post crisis. So things look great. From a QNB perspective the same thing. We are looking at it like this is going to continue for some time and we are basically accessing our situation as a standalone to continue to work in a standalone basis. It does not affect really our position, it does not affect our strategies, and it does not really affect our growth targets. You know it, we're continuing with our strategies. We see opportunities coming from this conflict. And the opportunities are to reposition Qatar as a very good strong trading hub. It's going to be on a competitive basis even with countries in the region who presented themselves in the past as free trade countries and so we see Qatar becoming very aggressive and very strong.
And it's not something new; it is a part of the Qatar 2030 vision but what we have done in the past we said, I mean always we said we need to have certain priorities, now I think we need to reprioritize in terms of like building a very strong regional trading hub in Qatar itself.
AD: But nonetheless there are some cracks starting to show because of the conflict. At what point do you think financial stresses such as liquidity drying up at the banks and various areas of the economy suffering because of the blockade. At what point do you think Doha might have to compromise and bend?
Ali Ahmed Al-Kuwari: I mean in terms of economy, in terms of financial system we have been very very resilient. You already have three months of blockade and ok, we lost some foreign deposits in between, but if you look at it, I give a couple of numbers – 170 billion of foreign deposits in the system, 20 billion riyals – sorry 170 billion riyals – 20 billion riyals leaving the system it's not a big deal. When you talk about huge numbers of reserves for the banking system itself.
And the government has always said they are ready to inject whenever – you know they already did. And also don't forget that Qatar as well as the banks have very strong rating even after change to negative which is expected because when you have a situation like this it would happen to anyone. But even with the negative, it's AA rated country, AA rated banks. So I don't see this stresses are going to continue.
And eventually what's going to happen I think even international investors – and it's the international investors who will care about it the most – very soon they will start realizing this is a situation is going to have a standstill for some time and they're going to have to look at Qatar as in a standalone basis. This is already happening, already seeing it. So we have not really seen this very much.
And the other thing is diversification – let me talk about QNB perspective in that one. We have started our diversification journey many years ago. The idea there is really to have – to build a multiple funding platform as well as multiple profitability engines platforms. You know, QNB is the largest bank in the Middle East and Africa and by a big margin and we are present in 31 countries. Our assets is north of 110 billion dollars, our profitability for the first six months of the year was 1.8 billion dollars which is seven per cent over and above last year. Our growth in the assets was 15 per cent in loans around the same thing and deposits also grew by 15 per cent. 50 billion riyals, only this year, growth in our deposit books. Our diversification is paying off now because we don't have specific exposure to a certain country, we have multiple countries, and with the Qatar name and Qatar financial power and everything, the confidence we see it there.
As we go along as I said I am comfortable. The biggest issue is the shock the first few days, after that everything is proceeding as normal. And we see investors coming with strong support especially Arab countries who are, have very strong trade with Qatar and they know the future is very important for them to continue.
AD: You said the shock was only in the first few days and unfortunately this has dragged on for more than three months and as you said there's no resolution in sight and we don't know how long this is going to go for. I understand as your central bank in Qatar has told banks to tap international investors to raise financing rather than relying mainly on government funding. There are some reports that QNB is also having discussions with international lenders about private sales or bond sales. Can you confirm or deny any of those?
Ali Ahmed Al-Kuwari: Actually it's already happened. Last night we closed for most bond issuance in the Taiwanese market. It was one of the biggest issuance in the Taiwanese market – 630 million dollars and with very thin pricing five per cent, 30 years so I think this is one of the best – even sovereigns cannot issue at this rate and at this size. So this is an ongoing exercise for us you know, with and without crisis. We have an EMTN program of 17.5 billion dollars, you know active EMTN program. We hardly use even half of that so we still have more. And we do it in opportunistic places wherever we see a chance in terms of like appetite and the price is right because we are very disciplined in terms of lower cost of funding. So we are active and we are going to be active in this market regardless whether there was a situation or there wasn't a situation. This is a part of an ongoing exercise to tap into the market and how we fund our work.
AD: OK so you can definitively say CNBC spoke with the Finance Minister of Qatar in June and he was saying look if they lose a dollar we lose a dollar and he dismissed concerns of the financial meltdown. He said we do have the tools to defend the currency defend the economy. So would you agree with that?
Ali Ahmed Al-Kuwari: Absolutely. I mean as I said the country is in a very strong position they have all the tools to do it. They have not used all – they've used maybe 10 or 15 per cent of the tools so far and they can do more if needed. Eventually as I said this is a situation where everybody will have to learn to live with – to coexist with the situation, I personally hope this does not last very long, and it's a personal preference, but again if it does we're okay, we're there. We'll do what is in our position and to achieve our growth target. We are not only in a defensive position so we are on target for growth, on target for strategies and maybe even some opportunities as we go along.
AD: What the best opportunities that present themselves to you right now? What's the top priority?
Ali Ahmed Al-Kuwari: OK for us, first of all there is a chance to accelerate and grow the performance of the private sector of Qatar. This is going to represent Qatar again as a trading hub – as a competitive trading hub for many countries in the region. And we have the tools, we have the strength, we have the financial power and we have you know the assets, we have again the thinking behind it you know as you probably see Qatar has been moving – an aggressive move they opened the country for 82 nationalities who can't get visas which is something none of them in listed countries have achieved this kind of openness for the world.
And this is the story for Qatar – we are very much open, we are very much dynamic, we are business minded when it comes to decisions, we don't have feelings or something or we don't take hard feelings about anything. Even if you see from Qatar's reaction during the crisis it has been almost in that format. They have not been active, they have not done a single action; they have always said business as usual and this is a message we have sent to everybody, we are in business, we are in growth we will have the 2022 world cup and hopefully everyone can join us there.
AD: So you think the conflict won't affect the building and infrastructure for the 2022?
Ali Ahmed Al-Kuwari: It shouldn't – already as I said we have achieved alternative resources from many other countries and recently we have opened one of the largest ports in the middle east and in the world – Hamad national port, our sea port, which is one of the most high tech port in the region, and we have already started building direct shipping to Hamad from India, from China, from Malaysia, and so these activities – I think very soon we are going to see one hundred per cent logistics all figured out and it is going to be done in a better, cheaper, faster way.
AD: You've mentioned the diversification of the economy a number of times because of Al-Kuwari, about 60 per cent Qatar's haven't used current account coming from LNG, and I understand that a number of Qatar's customers using this row, as leverage to lower prices, is there another part of the economy that you can fall back on if indeed the revenue of LNG start to drop?
Ali Ahmed Al-Kuwari: What Qatar has done taking the benefit of the income from oil and gas and mainly gas – gas has been really the power for Qatar in terms of the last five years. And what happened Qatar has been building its assets and investments abroad through Qatar investments authority and we have built a very strong franchise, very strong assets outside of Qatar and this is what I was referring to 300 million dollar of foreign assets are now available for us.
And this is going to continue because this is the diversification taking advantage of the oil revenues which we don't know what is going to happen. We have seen oil prices dropping from 110 to as low as 30 dollars or under, and this is not something we can look at – although gas have a different view, gas is a more consistent and we see the demand for gas over time and gas is the Qatar tool for the future. We see energy is really - there is increased demand throughout the world, and there is requirement for gas, there is cheap energy. Cheap and also clean energy. So I mean this demand is going to continue.
But more importantly than this is to build a very strong private sector in Qatar. We have to move away from hydrocarbon GDP to a knowledge based GDP and this is what is said, His Highness Emir in his 2030 vision. He said the goal was really to move away from a hydrocarbon based economy to a knowledge based economy. And we see that it is already happening, actually as we speak today the contribution from non-oil and gas is higher than the oil and gas in GDP of Qatar. Already this is happening so we are investing in education and health and infrastructure and tourism. We're building a very strong private sector standalone economy, using the money we're generating from hydrocarbon.
AD: Back to the issue of finding new customers, reaching out to places such as Asia and finding Asia investors. To what degree have you seen a withdrawal of deposits from customers say in the areas that Qatar is having a conflict with, like the UAE, Saudi Arabia and Egypt.
Ali Ahmed Al-Kuwari: Yes, as I have said, what has been withdrawn is as expected, and actually well, anticipating zero balance sheet, at the end of the day, from these countries. But let me tell you from assessment point and this is representative of about three to four per cent of the total deposit and to replace three to four per cent is not a big deal.
And let me also remind you, there is a two way relationship. So there is deposit coming from the blockaded countries into Qatar and there is vice versa. Also Qatar has investments and has placements with these economies. We have to say that for every dollar lost in one side that there is a dollar lost in the other side and I am saying it in a very conservative way, sometimes it's a dollar and a half, or two dollars from one side over another, because Qatar is not dependent on these countries. While you know some countries are dependent in certain trade flows with Qatar.
I mean, this is very important to say this. But Qatar also has deposits in the region. So it's, the full deposit book of the blockading countries with Qatar is only three to four per cent. And we're already assuming a zero balance at the end of the day.
And the most important thing is Qatar to retain its position and maintain trust of the international community this is the most important thing, which is happening and we're seeing strong support for Qatar from all over the world in terms of their position their political, their economy already we have seen our friends standing behind us, they're supporting us very strongly.
AD: This is a question that we are all asking our guests that we are interviewing in the Singapore Summit, and that is what do you think of Mr. Trump, President Trump of the United States?
Ali Ahmed Al-Kuwari: Again, I'm not in the position to comment on President Trump but this is maybe an issue for the U.S. to look at. And I think you know we have to deal with any presidency system in the U.S. We have a very strong relationship with all U.S. banks, excellent relationship, and this relationship is continuing. We have very good support from all the U.S. banks and again this is more for the U.S. to talk about. As far as we are concerned, we're dealing with any presidency or any leadership in the U.S.
AD: His efforts to intervene in the conflict were not successful, there was a phone call between the Emir and the Saudi Arabian Crown Prince and I understand that just hours after the phone call with Mr. Trump, that two sides were back to attacking each other. Do you feel that maybe Mr. Trump was favoring the Saudi side?
Ali Ahmed Al-Kuwari: I cannot comment, to be honest on this one, I'm not aware of what happened and on what are the efforts. As I said, for us, if the conflict continues as it is, we're ready for it. And hopefully it doesn't.