During the years of high oil prices, Qatar’s banks successfully rode the wave of profitability. They have funded many projects. They were flooded with cash. They made acquisitions and increased their presence abroad.

Then came June 2014 and the fall in the price of oil, the backbone on which many Middle Eastern economies are based. From $115 a barrel, oil plunged 70% to below $35 a barrel in February 2016. This sharp drop in oil prices in Qatar coincided with a ramp up of infrastructure projects, including the construction of the Doha metro, several highways and stadiums. which will be used for the FIFA World Cup in 2022. The intersection of the two – increased spending on infrastructure projects and a sharp drop in oil prices – has prompted a warning from the head of the International Monetary Fund (IMF ), Christine Lagarde, for Qatar and other Gulf States. to tighten one’s belt.

Standard & Poor’s warned in a report this year that banks in Qatar are set to face tighter liquidity, weaker credit growth and lower profits this year, in part due to falling prices. oil prices and a slowdown in the government’s public investment program. But, according to the report, the asset quality of Qatari banks has remained stable and credit growth has shown resilience, thanks to strong private sector activity in 2015.

“We believe banks will manage their funding profiles more cautiously, which should translate into lower growth. We also expect credit losses to increase given the economic slowdown and the pressure we expect in certain sectors, such as outsourcing,” said Fevzi Timucin Engin, head of Standard & Poor’s, in a recent interview.

Heeding the warnings, Qatar Central Bank Governor Sheikh Abdullah bin Saud Al-Thani said the QCB “will continue to actively manage liquidity in the system to ensure a stable interest rate environment and thereby facilitating an adequate flow of credit to the productive sectors of the economy”.


Commercial Bank of Qatar CEO Joseph Abraham remains optimistic about the banking sector and the economy as a whole. He says that even though economic growth in Qatar has “indeed slowed down a bit…we are still seeing robust economic growth in our economy.”

He added: “Qatar will spend nearly $200 billion over the next decade on infrastructure projects as we inch closer to the 2022 FIFA World Cup. Despite falling oil prices, the minister Qatar Finance said that the execution of these projects will continue as usual. Commercial Bank remains firmly committed to supporting and financing the development of these major infrastructure projects.

Ali Ahmed Al-Kuwari, CEO of the Qatar National Bank (QNB) Group, shares Mr. Abraham’s optimism: “The recent drop in oil prices will only have a minor impact on the strong diversification momentum of the Qatari economy. The Qatari economy will continue to grow thanks to strong public and private investments to diversify the economy away from the hydrocarbon sector. As a result, the banking sector will continue to benefit from these tailwinds, with double-digit growth in assets and deposits.

“Strong profitability is supported by high asset quality (five-year average non-performing loans of 1.8%) despite high capital buffers with a five-year average capital adequacy ratio of 17, 6%.”

Al-Kuwari attributes part of the banking sector’s stability to a traditionally conservative approach to credit.

“This engenders a strong risk governance mindset, generates a clear definition of risk appetite and promotes prudent risk management at consolidated and local levels,” he said. “Caps on the consumer credit limit and strict lending standards have contained the risk of excessive private sector leverage with conservative loan-to-value ratios for specific products.”

Assets and profits up

Despite the uncertain global political and economic environment, the majority of Qatari banks satisfied their shareholders by recording an increase in their assets and profits in 2015.

QNB Group’s net profit in 2015 was QAR11.3 billion ($632 million), up 8% from 2014, while total assets increased by 11% to 539 billion QR, the highest ever.

Doha Bank CEO Dr. Raghavan Seetharaman notes that his bank recorded Q1 2016 net profit of QAR 354 million. Total assets grew from QAR 74.2 billion at the end of Q1 2015 to QAR 84.7 billion as of March 31, 2016, a year-on-year increase of 14.2%.

Deposits also showed a 13.7% year-on-year increase from QAR 45.2 billion to QAR 51.4 billion. Dr Seetharaman says this increase in deposits was “evidence of the bank’s strong liquidity position”.

It also notes that Doha Bank has achieved a 1.69% rate of return on assets, “which is a clear demonstration of efficient use of shareholder funds and optimal asset allocation strategies.”

QNB, Commercial Bank and Doha Bank are among the largest of Qatar’s 14 conventional banks. The country also has four Islamic banks, including Qatar Islamic Bank (QIB), the country’s first. According to Ernst & Young, global Islamic banking assets grew at an annual rate of 17.6% between 2009 and 2013.

QIB Group CEO Bassel Gamal said strong growth is expected to “continue for the foreseeable future”.

QIB made a profit of QAR 1.95 billion for the year 2015, which is a strong increase of 22% from 2014.

Another Islamic lender, Masraf Al Rayan, recorded net profits of QAR 2.07 billion in 2015, an increase of 3.6% over the previous year. Group CEO Adel Mustafawi said Islamic finance “has proven to be resilient during difficult economic cycles and has demonstrated strong support for the economy and its customers during difficult phases”.

Furthermore, according to CEO Tamim Al-Kawari, 2015 was a banner year for QInvest, Qatar’s leading investment bank. “We recorded the highest turnover since inception of QAR 393 million and a net profit of QAR 154 million. We delivered consistent performance throughout 2015 despite challenging global economic conditions and regional volatility, resulting in revenue and net profit increases of 32% and 76% respectively. In addition, we recommended doubling the dividend to shareholders for fiscal year 2015.”