Qatari banks’ profitability stays strong: Moody’s
16 Sep 2020 – 8:13
This file photo shows a man walking across the Grand Hamad Street, also known as the ‘Bank Street’ in Doha, Qatar.
Qatari banks’ total income rose by 6 percent to QR21.4bn in the first half of 2020 from the same period a year earlier, driven by a 4 percent increase in net interest income and a 14 percent increase in non-interest income.
The banks’ solid capital buffers will continue to support them as asset quality deteriorates. And while there is pressure on profitability from the coronavirus outbreak and lower oil prices, Qatari banks continue to have strong income generating capability despite higher provisioning costs related to the coronavirus outbreak, Moody’s Investors Service said in a report yesterday. Moody’s expects total income to be lower in the second half due to lower business volumes. Loan-loss provisioning costs rose to 26 percent of pre-provision income in the first half of 2020, from 17 percent a year earlier.
“We expect provisions to rise further, reflecting problem loan formation as weaker economic activity makes it harder for borrowers to meet their repayments, particularly in the real estate, construction and contracting sectors. However, the banks’ large exposure to the strongly rated Qatar sovereign will shield overall loan performance to a large extent,” said Nitish Bhojnagarwala, VP-Senior Credit Officer at Moody’s.
The report highllighted that the Qatari banks preserved their capital buffers this year, supported by strong earnings and lower dividend payout ratios.
Those solid buffers will continue to support banks as they face deteriorating asset quality and pressure on profitability from the coronavirus outbreak and lower oil prices.