Despite the first quarter of 2020 manifested a significant impact of the international volatility on the global banking industry, Qatar’s banking sector remained resilient compared to other countries. The joint coordination of all the stakeholders ranging from public authorities, public and private institutions have contributed to ensure Qatar banking industry’s stability among financial institutions.
PwC’s “Qatar Banking Report” for Q1,2020 noted that over the first quarter, the aggregated total assets of the eight listed commercial banks in Qatar grew QR29bn, i.e.1.8 percent vs FY 2019 and 22.6 percent vs Q1 2017, to reach QR1.65trillion.
The bank’s aggregated loans and advances reached QR1.16 trillion, growing 23.7 percent considering the three-year period to Q1 2017. The aggregated profits of the eight listed commercial banks showed a small decline of 1 percent on 31 March 2020 compared to Q1 2019, which resulted from increased expenses mainly driven by a short-term raise of net impairment losses on loans and advances to customers.
However, considering a threeyear period, the aggregated profits of the eight listed commercial banks showed sharp growth and resilience, increasing by 15.3 percent as at 31 March 2020 compared to Q1 2017.
Going forward, Qatar banks can further mitigate risks and position themselves for emerging opportunities during this volatile period. The banks need to assess exposure to sectors and clients that will be affected the most and invest in deeper business relationships.
This can include flexible repayment options, new debt packages to address cash flow shortages, and relief and insurance products. The banks are also advised to ensure adequate liquidity as wholesale funding comes under pressure and markets continue pricing for the worst-case scenario.
The industry should have a clear strategy on when to buy as some banks and financial institutions fall into distress there will be potential for M&A and other strategic moves, PwC analysts said.
Mehrayar Ghazali, Financial Services Leader at PwC Middle East said: “Banks in Qatar can further mitigate risks and position themselves for emerging opportunities during this volatile period and they have seemed to already respond with appropriate measures. Further actions can be taken to navigate the crisis in the short-term and mid-term, to position themselves for the economic rebound. These actions include assessing exposure to sectors and clients that will be affected the most, investing in deeper business relationships to accelerate the economic rebound and having a clear strategy on M&A opportunities, especially monitoring banks and financial institutions in distress.’’
Burak Zatiturk, PwC Qatar Financial Services Leader said financial sectors across the globe are grappling with increased spikes in volatility due to the current unprecedented economic climates we are operating in.
He added: “In Qatar, the banks have experienced growth in total assets and total loans and advances over the last quarter of 2020 despite the volatility during the last quarter.”
Based on the disclosed results of the listed commercial banks in the State of Qatar, the aggregate total loans and advances to total assets ratio stood at 70.00 percent as at 31 March 2020, increasing by 1.0 percentage points over Q1 2020, from the 68.96 percent that was witnessed on 31 December 2019.
The total customer deposits balance amounted to QR1.11trillion as at 31 March 2020, an increase of QR27.0bnn or 2.5 percent over the 3 months of Q1 2020 and an increase of QR190.9bn or 20.8 percent since 31 March 2017.
The eight listed commercial banks’ aggregate loans and advances to customer deposits ratio stood at 104.4 percent as at 31 March 2020, increasing by 0.84 percentage points from its corresponding value as at 31 December 2019, and by 2.44 percentage points from 101.9 percent as at 31 March 2017.
Bassam Hajhamad, Qatar Country Senior Partner ended: “The current volatility is having an unprecedented impact on the financial industry in Qatar. However, the Qatari banks overall revealed resilience amid this uncertainty as the Qatar economy are more prepared today to weather the situation.”
PwC has identified 5 primary areas of attention for banks in Qatar for mid-term. They include digital transformation and financial inclusion driven by new regulations, credit risk due to deteriorating credit conditions, capital and liquidity levels ensuring risk mitigation of higher risk-weighted assets, income and profit risk and operational risks related to disruptions in workforce, data management and digitalisation of customer interaction
