A view of the Grand Hamad Street, also known as the ‘Bank Street’ in Doha.
Doha: Qatari banks’ total operating profit rose by 4 percent to QR43.9bn in 2020, up from QR42.1bn the previous year, boosted by higher net interest income of 9 percent. However, earnings were squeezed by an 11 percent decline in non-interest income, Moody’s Investors Service said in a report published yesterday.
The report added that capital buffers remained strong, supported by solid earnings. However, the coronavirus pressures will keep provisioning costs high for Qatari banks this year as loan quality worsens, despite resilient 2020 results, it added.
“Although Qatari banks reported resilient earnings in 2020 with the pandemic’s added pressure on profits, we expect provisioning costs to remain high in 2021,” said Nitish Bhojnagarwala, Vice President – Senior Credit Officer at Moody’s Investors Service. “This will be driven by a slow economic recovery that will make it harder for borrowers in sectors such as real estate, construction and contracting to repay debt.”
Provisioning costs rose to 32 percent in 2020 from 20 percent in 2019, due to the impact of the coronavirus and subsequent global economic shock. Moody’s expects total income to remain subdued in 2021 as lower business volumes strain profits.
While loan quality has largely stayed stable, problem loans are set to emerge across sectors most vulnerable to the pandemic such as hotels and restaurants, airlines, tourism and retail. Despite this, Qatari banks hold strong capital buffers that have been supported by lower dividend pay-out ratios and firm earnings. These strong buffers, coupled with an oil price recovery and greater political stability, will support banks’ financial performance this year, the report added.
