Qatar’s banking sector has shown resilience and recorded impressive business growth in 2021, driven by the need to continue supporting the country’s future ambitions.
The measures taken by the Central Bank of Qatar (QCB) have allowed the quality of the banking sector’s assets to be monitored this year.
Total assets of Qatari banks grew 0.2% month-on-month (MoM), up 6.7% year-to-date (YTD) in November to reach QR 1.795 billion.
Local lender costs remain the lowest in the region, reflecting the emphasis on efficiency to help counter the impact of increased provisioning.
Despite financial uncertainty resulting from Covid-19, Qatar’s listed banks recorded the smallest drop in profits among their regional peers, KPMG said in a previous report.
“The increase in loan provisioning due to the liquidity and credit problems facing borrowers reflects the more cautious approach taken by banks. This impact was partially offset by higher spreads and lower costs, ”said KPMG.
Amid the challenges posed by the pandemic, the local economy and banking system could maintain stability thanks to the proactive measures taken by the government of Qatar and the QCB.
One area of ​​particular interest was the Support Mechanism for Small and Medium-Sized Enterprises (SMEs). A separate part of these measures included the injection of capital into systemically important sectors, thus neutralizing to some extent the short-term impact on the financial market.
The overall loan portfolio (of Qatari banks) grew 0.5% month-on-month to reach QR 1,213.8 billion, while deposits fell 0.2% in November to QR 963.8 billion.
Qatar banks’ net profit returned to pre-pandemic levels in the first half (H1) of 2021, mainly thanks to an increase in net interest and non-interest income, according to Moody’s, a global rating agency credit.
The improvement in net profit is despite higher provisioning charges, the rating agency said, noting that the lenders it rates reported overall net profit of QR 11.8 billion, up 12% compared to the previous year.
Net interest income increased, mainly due to a sharp reduction in interest charges, he said, adding that total operating income rose 11% to $ 23.8 billion. QR during the same period in 2020.
The rise was largely due to a reduction in interest charges due to the low interest rate environment, he said, noting that interest charges fell 16% year-on-year, offsetting as well as the drop in interest income (3% compared to the first half of 2020).
This resulted in an overall increase in net interest income, although net interest margins remained broadly stable at 2.2%, reflecting strong loan growth of 9% year-on-year.
Despite an overall difficult economic environment due to the pandemic, the banking sector has expanded its balance sheet supported by low-risk public sector credit growth, according to the Central Bank of Qatar.
Banks have shown prudent management by proactively increasing their provisioning and improving their structural liquidity conditions. Banks have managed their cross-border risk well by properly adjusting their exposure to different geographic areas while reducing the risk of withdrawal by extending maturities.
The financial sector infrastructure provided the necessary support in a difficult operating environment during the year. The sharp increase in demand for electronic means of payment, in particular due to the closure of exchange offices and the reduction in working hours of banks, has been managed in a transparent manner.
The year saw QCB pursue several measures to support fintech and non-bank payment service providers in the development of Qatar’s economy.
These included a regulatory framework for licensing and overseeing FinTech operations and a regulatory sandbox that helps FinTech and other innovators conduct live experiments in a controlled environment under the supervision of QCB.
The non-banking financial sector in Qatar, made up of insurance companies, QDBs, brokerage firms and investment firms and QFC institutions, falls under the regulatory jurisdiction of the QCB and the QFC Regulatory Authority. (QFCRA).
Despite the continued impact of the Covid-19 pandemic, the assets of the QCB-regulated non-bank financial institutions sector in Qatar continued to show healthy growth this year.
This year, Qatar’s banking sector has witnessed the ‘successful merger’ of two leading banks – Masraf Al Rayan and Al Khaliji, creating one of the region’s largest Sharia-compliant lenders with total assets over 182 billion QRs.
The two banks are considered to be a single legal entity bearing the name Masraf Al Rayan with its head office in Lusail City.
Overall, Qatar’s banking sector remains secure, strong and strong. The sector has a high level of capital cushion while the levels of loan defaults are low.
At the same time, liquidity improved as banks were able to obtain funds from external and domestic sources.
Therefore, most experts believe that Qatar’s banking sector will exhibit sustainable growth, supported by a favorable macroeconomic environment in the post-pandemic era.