Posted on February 08, 2011

HSBC Holdings Plc is seeking clarification of an order by Qatar’s central bank requiring non- Islamic lenders in the nation to end services that comply with Shariah law.

HSBC Amanah, the Islamic banking unit of Europe’s largest bank, is in discussions with the central bank “to find a workable solution,” the company said in an e-mailed statement yesterday. HSBC has had operations in Qatar since 1954 “and has established strong and positive relations with the regulators,” the statement said.

“The Qatar Central Bank’s ruling of forcing conventional banks to cease their Islamic banking opportunities will prove detrimental to future earnings of a few conventional banks, whilst provides further market share opportunity for the dedicated Islamic banks,” Omair Ansari, equity strategist at Dubai-based Gulfmena Alternative Investments, said today.

Qatari Islamic banks surged yesterday, sending Masraf Al Rayan to the highest level since 2008, on speculation earnings will climb following the central bank’s decision. The Feb. 1 statement called for non-Shariah compliant banks to close Islamic branches by year-end and stop taking deposits in those units immediately.

Masraf Al Rayan, Qatar’s second-largest Islamic lender, rose 3.6 percent to 23.92 riyals at the 1:10 p.m. close in Doha today. Qatar Islamic Bank SAQ, the Arabian Gulf country’s biggest Islamic bank, fell 0.8 percent and Qatar International Islamic Bank retreated 1.8 percent today. Both shares soared more than 9 percent yesterday.

Qatari banks with Islamic banking units such as Qatar National Bank SAQ and Doha Bank declined today. Qatar National Bank, the country’s biggest lender, fell 1.9 percent to 136.4 riyals, the lowest level since Dec. 2. Doha Bank dropped 1 percent.

The central bank order was “just to make sure you do what you’re good at and what you were meant for,” Doha Bank Chief Executive Officer Raghavan Seetharaman said in a telephone interview yesterday. “We can always invest in Islamic banking, in Islamic funds.” He didn’t comment on the future of Doha Islamic, the bank’s Shariah-compliant arm.

source: Bloomberg BusinessWeek; by By Robert Tuttle and Zahra Hankir