Qatari banks performed well in 2011 and are projected to record double-digit growth in their net profits this year due to rise in domestic credit, according to a Kuwait investment bank.
“For 2012, we forecast a 20.4 per cent increase in the net profit of Qatari National Bank (QNB) while for Commercial Bank of Qatar growth is expected to be 19.2 per cent and Doha’s to be 12.6 per cent….for the two Islamic banks, growth is expected to be 14.5 per cent,” Global Investment House (GIH) said in a study.
The study said Qatari banks so far have enjoyed one the best asset qualities in the region, with the non-performing loan (NPL) ratio of banks covered by the report amounting to 1.3 per cent and provisioning coverage standing at 103.6 per cent.
“Strong government support and timely intervention by the state has meant asset quality has remained supreme, GIH said.
“As a result, provisioning has not had a big impact on bank results. And following the salary increase in September, the outlook for retail loans – a key driver of the increase in NPLS for the banking sector in the past – looks better with across the board improvements in retail asset quality.”
At the corporate end, despite NPL increases, credit quality deterioration was relatively contained, the report said.
It said this was a consequence of Government intervention in the real estate sector through a buy-out of real estate loans at the onset of the global financial crises.
As a result, the otherwise stretched property sector did not escalate to become a significant problem area for banks, it said.
The report noted that the capital adequacy of Qatari banks has remained consistently above 10 per cent over the last few years, and has become even stronger with Qatar Investment Authority’s (QIA) final capital injection in the local Qatari banks in 2011.
QIA injected QR1.6 billion in CBQ, QR737mn in Doha Bank and QR1.9bn in Qatar Islamic Bank.
Turning to credit, it said the government’s focus on developing the physical and social infrastructure will continue over the medium-term. “This is expected to spur loan growth and sustain it at high levels. Among the sectors, we expect Qatari banks’ proportion of loan books to the public sector to expand over the near term, after which we expect public sector loan growth to slow as the large hydrocarbon projects reach completion,” GIH said.
“Nevertheless, we still expect public-sector-related loan growth to remain at double digits in the medium term. Within the private sector, near-term growth has been forecast to be mainly in the real estate sector and eventually trickle down to the contracting sector as projects get underway.”
On the retail front, the report expected a slight pickup in consumer lending following wage increases for Qatari public sector employees, with Qataris still accounting for the bulk of banks’ retail business. “Overall, we assume 2012 net loan growth of 16.2 per cent for the sector,” it added.