Posted on February 13, 2015

Qatar's listed banks continued to grow in 2014, despite declining oil prices, said The Peninsula. The banking sector witnessed robust asset growth; lower impairment charges, stronger asset quality and higher profitability last year, KPMG's annual result snapshot for listed banks in Qatar indicated yesterday.

"The combined net profitability for all banks increased by 12 percent from the year ending December 31, 2013, predominantly driven by higher net interest income and lower net impairment charges. Share prices for almost all banks exhibited a positive change from the prior period. Islamic bank share prices have well outperformed their conventional counterparts, with an average increase of 41 percent compared to 10 percent for the conventional banks," KPMG said.

The collective asset base of all banks has increased by 12 percent, up by QR105.8bn, from December 2013, which is primarily due to the increase in lending portfolios by QR82.6bn, or up 14 percent. This is predominantly a result of increased public spending on the back of a gradual acceleration of infrastructure projects. "Strong economic growth and increased public sector infrastructure activity have been the main drivers behind the positive results," said Omar Mahmood, Partner at KPMG in Qatar and Head of the Firm's Financial Services division in the Middle East and South Asia.

Deposits are up, with a healthy growth of 11 percent to QR67.5bn on year-on-year. "This will certainly be an area of continued focus for banks in Qatar as they look to reduce the reliance on large one off government deposits. In addition, the recently issued Qatar Central Bank regulations on the 'loan to deposit' ratio which come into effect over the next few years, will force banks to actively look to increase their customer deposit base, and if not then look at restricting their balance sheet growth ambitions", he said.

Looking forward, Omar added: "Given the increasing regulatory pressures, predominantly driven by Basel 3 requirements that the Qatar Central Bank is adopting, it is likely that we will see an increase in capital market activity in 2015, with banks looking to tap into the sukuk and bond markets while also exploring possible capital raising opportunities". If there were to be a slowdown in government spending as a result of a persistent decline in oil prices, this would have an adverse impact on the banking sector, given the significant reliance on public sector spending and limited opportunities for retail growth.