The assets of the Qatari banking system passed the QR1 trillion ($275 billion) threshold this year, in another sign of the continued healthy growth of the sector.
According to data compiled by Qatar National Bank (QNB), the country’s oldest and largest bank, the sector’s assets grew by a compound annual rate of 18.1 per cent from 2009 to 2013. Deposits over that time grew by 22.1 per cent, loans by 20.8 per cent, and profits by 12.5 per cent.
“The banking sector continues to grow at a double-digit rate on the strength of Qatar’s rapid economic growth and large investment spending”
Adding to the sense of positive momentum, the loan-to-deposit ratio has been falling, from 111 per cent in 2011 and 2012 to 105 per cent in 2013, and non-performing loans accounted for just 1.9 per cent of all loans at the end of last year.
“The banking sector continues to grow at a double-digit rate on the strength of Qatar’s rapid economic growth and large investment spending,” says Joannes Mongardini, head of economics at QNB Group. “Banking assets are projected to grow by 11 per cent in 2015, driven by an increase in loans to finance Qatar’s large public and private projects currently underway.”
Given all that it is unsurprising that the IMF characterised the local banking sector as “well capitalised, liquid, and profitable” in its latest annual review of the Qatari economy in May 2014. Others in the region echo that positive assessment.
“The overall performance of Qatari banks’ remains solid. Strong public spending continues to support the operating environment and drive credit growth, which is expected to be among the highest in the GCC for 2014,” says Nitish Bhojnagarwala, a Dubai-based analyst for credit ratings agency Moody’s Investors Service. “The banks’ financial metrics remain robust. Strong earnings and sound capital and liquidity buffers position them well to benefit from the economic activity driven by large government spending.”
However, while the market is healthy, it is also rather unbalanced in some respects. QNB is responsible for close to half of all assets, with QR475 billion at 30 September this year. The next largest institution is Commercial Bank of Qatar, which has assets of some QR114 billion – less than a quarter of the size of the market leader.
Both of these banks are conventional lenders, but some Shariah-compliant banks are also fairly sizeable. The biggest is Qatar Islamic Bank which has a network of 32 branches and some QR93.3 billion in assets, followed by Masraf al-Rayan, with a far smaller branch network of 10 outlets but QR77.8 billion in assets.
One of the key factors behind the positive performance of the banking sector is the ongoing high levels of government spending, which are underpinning growth in the local economy and helping to ensure that all Qatari banks are making healthy profits these days.
“The Qatari banking sector is well placed to take advantage of the swathe of financing opportunities associated with the government’s ongoing investment drive,” says Tom Simmons, an economist at Saudi Arabia’s Samba Bank. “This is already evident in a pick-up we’ve seen in lending to contractors, which was running at 42 per cent in the 12 months to September, though from a small base. To this end we see credit growth remaining comfortably in double figures through to 2017.”
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